The three-month bidding war for MCI ended yesterday as Qwest dropped out after the long-distance provider agreed to an $8.54 billion deal with Verizon...
NEW YORK — The three-month bidding war for MCI ended yesterday as Qwest dropped out after the long-distance provider agreed to an $8.54 billion deal with Verizon and rejected a higher-priced offer from Qwest for the fourth time.
The price tag for MCI ended up about 25 percent higher than the original amount Verizon agreed to pay for the phone company formerly known as WorldCom.
But it is still 13 percent less than the $9.85 billion offered by Qwest in what became the biggest telecom bidding war since 1999, when Denver-based Qwest outgunned Global Crossing to acquire the regional Baby Bell US West during the technology bubble.
Throughout the bidding contest, MCI directors suggested they were troubled by Qwest’s $17.3 billion in debt.
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MCI shares fell 84 cents to $25.70, dropping them below the price of at least $26 a share Verizon agreed to pay yesterday.
Verizon’s shares slid 83 cents to $34.97.
Qwest shares rose 5 cents, or 1.5 percent, to $3.47. Qwest had offered $30 a share in cash and stock.
Verizon hasn’t said whether it plans to continue using the MCI brand name, but the takeover will keep it on more equal footing with SBC, whose $16 billion deal to acquire AT&T set off the scramble for MCI in January.
MCI agreed to the new Verizon deal slightly more than a week after it tentatively threw its support behind the latest Qwest bid.
But it stopped short of accepting that offer, and Verizon was given a week to respond with an improved proposal.
MCI investors are now slated to receive $5.60 in cash, the same as in Verizon’s prior bid, and at least $20.40 worth of Verizon stock for each share of MCI.
Both MCI and Verizon stressed the takeover will protect the interests of MCI investors by providing greater comfort for MCI’s valuable base of corporate customers.
“A large number of MCI’s most important business customers had indicated that they prefer a transaction between MCI and Verizon rather than a transaction between MCI and Qwest,” MCI’s statement said.
Qwest bristled at that, as well as the MCI board’s persistent assertions that Qwest’s finances and business prospects were such a worry that a lower-priced deal with Verizon made more sense.
“By accepting a lower offer, without even contacting Qwest, and by reportedly allowing Verizon to instruct MCI to impugn Qwest, it is only fair to conclude that MCI is more interested in bending to Verizon’s will than serving its shareholders,” a Qwest statement said.
“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,” the statement said.
A spokesman for Qwest said the decision was “final,” making it unlikely hedge funds and other investors will be able to ride the bidding war any higher. In fact, yesterday’s drop in MCI’s share price could be a sign that short-term players have begun heading for the exits.