MCI Inc.’s board of directors rejected Qwest Communications International Inc.’s latest acquisition proposal in favor of a previous and lower bid from Verizon Communications Inc.
MCI’s board noted that the Qwest bid, which totaled $8.9 billion in its current form, “is not superior to its $7.5 billion merger agreement with Verizon that was agreed to late last month.”
“MCI’s board also took into consideration a number of uncertainties in terms of value and likelihood of closing, including the negative sentiment among MCI customers toward a Qwest combination,” MCI said in a statement. “Other concerns centered on Qwest’s synergy assessments, as well as the risks associated with Qwest’s contingent liabilities. In the face of these risks, MCI was not willing to jeopardize the certainty of its Verizon agreement for the uncertainties surrounding the Qwest proposal.”
Qwest said its last proposal totaled $27.50 in cash and stock per MCI share and was a 20-percent premium over Verizon’s offer of $23.10 per share. MCI reportedly asked Qwest Chief Executive Officer Richard Notebaert to raise its offer to $30 per share, but was refused. MCI’s stock was trading up slightly at $25.23 early Wednesday.
“MCI’s board of directors has chosen to reject what we believe is a superior offer to acquire MCI,” Qwest said in a statement. “The company is currently weighing its options, and shareholders will dictate the next steps of the process.”
Analysts noted that while MCI attempted to make a stand with its refusal of Qwest’s proposal, its attempt to garner more money from Qwest hints that the bidding process might not be over. Many also cautioned Qwest to not get to carried away in trying to acquire MCI as Qwest is already in a tough financial situation and deeply in debt.
“Already in debt up to its eyeballs, acquiring MCI will just perpetuate the sticky situation in which Qwest finds itself financially,” wrote Ovum principal analyst Jan Dawson in a research note.
