Verizon Ups Ante For MCI; Qwest Bows Out
New York -- Verizon today announced it had agreed with MCI to further amend the terms of its February 14 agreement to acquire MCI. As with the original offer and the revised bid of March 29, the MCI Board of Directors unanimously recommended approval of the amended agreement to its shareholders. This reverses MCI's decision last week to accept an acquisition offer from Qwest Communications (see related story).
In response to today's announcement, Qwest released a statement that included: "It is no longer in the best interests of shareowners, customers and employees to continue in a process that seems to be permanently skewed against Qwest. We pursued MCI with tenacity and discipline and feel strongly that our bid would have brought far more value to MCI shareholders. Unfortunately, the latest in a string of decisions reconfirms what we have believed all along: that MCI never intended to negotiate in good faith with Qwest nor maximize shareowner value."
Under the amended Verizon agreement, each MCI share would be exchanged for cash and stock worth at least $26.00, consisting of cash of $5.60 expected to be paid promptly upon approval of the transaction by MCI's shareholders plus the greater of 0.5743 Verizon shares for every share of MCI Common Stock or a sufficient number of Verizon shares to deliver $20.40 of value. Under this price protection feature, Verizon may elect to pay additional cash instead of issuing additional shares over the 0.5743 exchange ratio.
"The evolving nature of the telecommunications industry requires that effective competitors have financial strength and a full array of offerings," Ivan Seidenberg, Verizon's chairman and CEO, said. "Verizon is a leading national communications provider with a stable balance sheet, a premier national wireless business, and a plan to invest in MCI so that MCI's present and future customers can receive world-class products and services."
Commenting on MCI's statements in its press release today regarding customer preference for Verizon, Seidenberg added: "We note MCI's concerns about the impact on its business of the present uncertainty about its future. Verizon is committed to a business plan for MCI that will achieve cost savings in an orderly fashion while maintaining the integrity and scope of MCI's services. We believe Verizon's commitment to build upon MCI's strengths will effectively address the concerns expressed by MCI's customers. The Verizon-MCI combination will deliver large-business and government customers a complete range of state-of-the art products and services, with end-to-end connectivity on the most sophisticated IP (Internet Protocol) based network, including wireless voice and data services. We believe Verizon shareholders will benefit from the merger because it will enable us to rapidly and cost-effectively accelerate our Enterprise strategy and be a leading competitor in this important market."
The transaction requires approval by MCI shareholders, and regulatory approvals, which the companies are targeting to obtain in about a year. The proxy statement is currently under review by the SEC, and both Verizon and MCI look forward to a shareholder vote this summer.
Source: Verizon