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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.
More Stories • Converging News 152005 / Buy Out and Merger Boom LookRadio

  ByLines: Editors Note

Respectfully Submitted
Josie Cory
Publisher/Editor TVI Magazine
TVI Magazine, tviNews.net, YES90, Your Easy Searh, Associated Press, Reuters, BBC, LA Times, NY Times, VRA's D-Diaries, Industry Press Releases, They Said It and SmartSearch were used in compiling and ascertaining this Yes90 news report.
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