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Verizon Buys 13% MC IStock From Mexico's Carlos Slim
Helu
• • April 10, 2005 / Verizon Communications
Inc. said Saturday it was paying $1.1 billion to acquire a
13.4% stake in MCI Inc. directly from its largest single
stockholder.
• • The transaction removes a major wild
card in Verizon's bid to fend off a higher-priced offer to
acquire MCI by Qwest Communications International Inc. of
Denver.
• • The New York telephone company is
paying $25.72 per share in cash to Mexican billionaire
Carlos Slim Helu, who had previously expressed
dissatisfaction with offers from Verizon and Qwest. The deal
values Slim's 43.4 million shares at an 11% premium to the
$23.10 per share Verizon agreed to pay MCI's other
shareholders two weeks ago in a sweetened $7.5-billion
deal.
• • Verizon Chief Executive Ivan Seidenberg
appeared to leave open the possibility that Verizon might
increase its payout to the other shareholders of MCI, based
in Ashburn, Va.
• • "While this was an opportunity for us
to purchase a block of shares under unique circumstances and
is an important step forward in our acquisition of MCI, we
will continue to assess the situation as we move toward a
vote by the MCI shareholders," Seidenberg said in a
statement.
• • Verizon and Qwest, two of the nation's
biggest telephone companies, have been battling for two
months to win MCI and its national fiber-optic network and
lucrative roster of government and corporate
clients.
• • MCI's board has twice rejected
higher-priced offers from Qwest out of concern for that
company's weak financial condition. Qwest criticized
Verizon's deal with Slim and said it would continue its
pursuit of MCI.
• • "By entering into its deal with Mr.
Slim, Verizon has both created two classes of shareholders
and called into question the MCI board's previous
determination that Verizon's lower offer to the other MCI
shareholders was superior and fair," Qwest said in a
statement Saturday.
• • MCI spokesman Peter Lucht declined to
comment.
• • The price being paid for Slim's MCI
shares is almost even with Friday's closing quote of $25.84,
but about 7% below Qwest's latest offer of
$27.50.
• • Qwest, which has bid $8.9 billion for
MCI, said Friday that a telephone poll showed shareholders
who owned more than half of MCI's outstanding stock
considered Qwest's bid superior to Verizon's. However,
Verizon's agreement with Slim removes a potential source of
dissent against its deal.
• • Slim shares were not included in the
poll results, said a source close to Qwest who spoke on
condition of anonymity. Qwest could submit a new bid or take
its case directly to shareholders through a tender offer or
proxy fight.
• • ///
• • 102
Shareholders Vote on MCI stock sale to Verizon
• • Yes90
/ April 7, 2005 / The protracted battle for MCI Inc. may now
be decided by shareholders.
• • The long-distance carrier said
Wednesday that it rejected Qwest Communications
International Inc.'s bid of $8.9 billion, or $27.50 a share,
saying it wasn't "superior" to the $7.5 billion, or $23.10 a
share, offered by Verizon Communications
Inc.
• • The decision by MCI's board of
directors was the latest rebuff of Qwest in the two months
since the board agreed to be acquired by Verizon, the
nation's largest phone company.
• • Qwest, the smallest and weakest
regional carrier, said that it would "allow shareholders to
dictate the next steps," but stopped short of saying it
would launch a hostile takeover.
• • Last month Qwest hired a consulting
firm specializing in proxy fights, seemingly setting the
stage for the biggest hostile takeover in the telecom
industry since Qwest bought US West for $47 billion in
1998.
• • "We expect Qwest to begin polling MCI
stockholders as … its next course of action," analyst
David Barden of Banc of America Securities wrote in a note
to investors.
• • Many of MCI's largest shareholders,
such as hedge fund manager John Paulson of Paulson & Co.
in New York City, have said they like Qwest's proposal and
are eager to vote on it.
• • "It's clearly a superior value, both in
the short term and in the long term," Paulson
said.
• • Qwest still has room to improve its
offer, although it reportedly rejected a request from MCI
late Tuesday to increase the bid to $30 a share. Verizon,
which under previous sale terms had limited MCI's ability to
talk with other suitors, has given the green light to allow
talks up until shareholders vote. No date has been set for a
vote.
• • Most Wall Street analysts and
researchers said the deal with Verizon was better for MCI
shareholders in the long run than the short-term boost in
cash they would get from Qwest's bid. Verizon's stock market
value is $98 billion, more than 12 times that of
Qwest.
• • Joining Verizon, they said, would
combine Verizon's strong local, national and global network
with MCI's big business and government
customers.
• • The combination also would be able to
compete better, they said, with the venture being created by
SBC Communications Inc.'s pending acquisition of AT&T
Inc., the nation's largest long-distance
carrier.
• • "Isn't it a wonderful thing to see this
less-than-conventional approach to create long-term value,"
said analyst Bryan Van Dusen of the Yankee Group research
firm in Boston.
• • The corporate market is a key asset
that both Verizon and MCI want because of its potential
growth, Van Dusen said. But Verizon, strong financially and
dominant on the East Coast, already is making good strides
in that market, he said.
• • "For Qwest, it really is a fundamental
difference between struggling as the smallest Bell company
with little room for growth or having a bright future," Van
Dusen said. "That's why there is such a tension by Qwest.
That's why it will not stop and will consider every
alternative available."
• • That's also why, to MCI shareholders
such as Paulson, a deal with Qwest makes more
sense.
• • "Combined, the two are stronger than
either one is individually," he said. "And Qwest has far
greater ability to create
synergies."
• • Qwest says it can save $14 billion by
combining its national network with MCI's. Verizon figures
it will save about $7 billion.
• • Both Van Dusen and Paulson note that
Verizon will remain strong and continue to grow without MCI.
Paulson believes a Qwest-MCI operation would provide another
strong national player and more
competition.
• • In turning Qwest down Wednesday, MCI
said it questioned the long-term value of Qwest stock, which
has been sliding. Qwest's shares fell 8 cents Wednesday to
$3.78 on the New York Stock
Exchange.
• • Paulson said the Verizon deal was
"safer" in easing downside risks, but it also had little
upside benefits, giving MCI only 5% of the company and
little hope of big increases in the stock price. The
potential benefits of going with Qwest, on the other hand,
would include a 40% stake in the combined company and a lot
of room for the stock price to
soar.
• • "There's significant value in creating
[the combination], and that ultimately will be
reflected in the stock price," Paulson
said.
• • One indication of shareholder mood
might be trades of big blocks of MCI shares in the coming
weeks. The stock gained 38 cents Wednesday to hit a 52-week
high of $25.39 on Nasdaq. If shareholders believe the lower
Verizon price might hold, they probably will sell quickly,
observers said.
• • Verizon shares gained 15 cents to
$35.51 on the NYSE.
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