Two of MCI's top five shareholders said they're "not happy" with the Verizon offer to buy the company for about $6. 3 billion, signaling a...
Two of MCI’s top five shareholders said they’re “not happy” with the Verizon offer to buy the company for about $6.3 billion, signaling a higher bid may be needed.
Verizon matched an offer from Qwest, people familiar with the matter said. MCI should sell for more, said Leon Cooperman, who runs Omega Advisors. John Paulson, president of MCI’s No. 4 shareholder, said a Qwest deal may have more benefits for MCI investors.
Opposition from holders of more than 7 percent of MCI’s shares may complicate efforts by New York-based Verizon to snatch MCI from Qwest without a premium. The offers value MCI at about 3 times annual cash flow, less than what SBC is paying for AT&T, MCI’s bigger rival.
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“I’m not happy,” Cooperman, whose New York-based fund owns about 3 percent of MCI’s shares, said yesterday. “The company is worth more than the numbers being thrown around in the paper.”
A $6.3 billion offer for MCI, which exited the largest U.S. bankruptcy last April, would value the company at $19.80 a share, below the current price.
The stock fell 28 cents to $20.75 yesterday. Verizon fell 54 cents to $36.31, while Qwest fell 70 cents to $4.15.
MCI’s board had regularly scheduled meetings Thursday and yesterday, people familiar with the matter said.
MCI, owner of a 98,000-mile network that delivers Internet access on six continents, would help Verizon sell a broader range of services to corporate customers. Qwest, the fourth-largest seller of long-distance service to businesses, would win big clients, while adding to cash flow to help the company manage $17.2 billion of debt.
MCI spokesman Peter Lucht and Verizon spokesman Robert Varettoni declined to comment.
Combining with Qwest, the fourth-largest U.S. local-telephone company, may be better than a Verizon tie-up because cost savings would be shared by fewer stockholders, said Paulson, whose $3.7 billion investment firm owns 4.1 percent of MCI’s stock.
By combining long-distance networks and eliminating jobs, Qwest officials think they can eliminate as much as $3 billion in annual costs after two years, people familiar with the matter said last week.
“A Qwest deal has the potential to create greater value for MCI holders,” said Paulson, the president of New York-based Paulson. “We can’t really get much upside with Verizon; we can get a lot of upside with Qwest.”
Qwest’s stock-market value is $7.5 billion, compared with $100.5 billion for Verizon, the nation’s largest local-phone company. MCI’s equity is worth $6.6 billion.
MCI, the former WorldCom, was forced into bankruptcy in July 2002 amid an $11 billion accounting fraud.