Qwest Communications International Inc. submitted a revised proposal to acquire MCI Inc. that included a collar on its stock price and accelerating the timing of cash payments. The collar fixes the equity portion of the deal at $15.50 per share, while maintaining the original offer’s cash and equity mix that provided an aggregate value of $24.60 per MCI share or a total value of around $8 billion.
The revised proposal was intended to counter an accepted bid by Verizon Communications Inc. that was valued at $20.42 per MCI share or a total price of around $6.7 billion. MCI reportedly accepted the lower Verizon bid due to questions regarding Qwest’s financial position that currently includes more than $17 billion in debt.
As part of the revised proposal, Qwest sent a letter to MCI’s board of directors asking for serious consideration of the offer. Qwest claimed the proposal would provide MCI shareholders with both a higher return on their investment as well as a greater presence in the combined entity’s operations.
“Qwest believes this revised proposal is superior to the Verizon transaction, because it delivers greater value in cash and stock per MCI share, synergy value of approximately $18 per MCI share in a combined Qwest/MCI enterprise and more favorable regulatory certainty and speed,” Qwest contended.
Qwest noted that MCI shareholders would retain approximately 40-percent control of a combined Qwest/MCI compared with 5 percent of a combined Verizon/MCI.
Analysts have noted that either combination would provide value for MCI shareholders, though a Qwest acquisition would likely face fewer regulatory hurdles and divestitures. Verizon is expected to alter its offer in an attempt to ward off the latest Qwest proposal.
