MCI Inc. shareholders owning at least a combined 20 percent of the company plan to withhold votes for directors at next week’s annual meeting to protest the board’s decision to accept a takeover bid from Verizon Communications Inc.
Omega Advisors Inc. and six other investment firms that together hold about 65 million of MCI’s 325 million shares won’t back the re-election of MCI’s directors at Monday’s meeting in Chantilly, Va., according to officials at the companies.
The revolt signals that MCI chief executive Michael Capellas may not easily win shareholder support for the decision to accept Verizon’s $8.44 billion offer. Denver-based Qwest Communications also may take the vote as a cue to return with a new bid after withdrawing a $9.75 billion offer last week.
MCI, the No. 2 U.S. long-distance telephone company, is expected to hold a vote on the Verizon deal as early as June.
“I’m just expressing my dissatisfaction with what they did,” said Leon Cooperman, who runs Omega, a New York-based hedge-fund owning about 3 percent of MCI’s shares. “If a large number of MCI shareholders withhold their vote, it may be a message to Qwest that they’d win if they came back in.”
Qwest, the No. 4 U.S. local-telephone carrier, on May 2 announced plans to exit a bidding process it said was unfair.
Ashburn, Va.-based MCI has repeatedly sided with lower offers from Verizon, the largest U.S. phone company. MCI directors say Verizon’s greater size and financial stability make it a better merger partner than Denver-based Qwest.
MCI investors, including Omega and Elliott Associates LP, have said Capellas and other directors should have backed Qwest’s bid.
Qwest chief financial officer Oren Shaffer said last week at a Morgan Stanley conference in Washington that the company is continuing to “assess the situation.” The comments indicated that Qwest may not have completely abandoned its plan to acquire MCI, Morgan Stanley analyst Simon Flannery said at the time.
Qwest spokesman Robert Toevs declined to comment beyond Shaffer’s remark. MCI spokesman Peter Lucht declined to comment.
If Qwest plans to challenge the Verizon-MCI deal, it may need to do so before MCI shareholders vote on it. There is no competing slate of MCI directors for shareholders to back, so withheld votes for the current board are a symbolic gesture.
MCI shares fell 3 cents Thursday to $25.40 in Nasdaq Stock Market composite trading. They have risen almost 50 percent since the company exited the largest bankruptcy in U.S. history a year ago.
Verizon shares fell 9 cents to $34.29, and Qwest slipped 2 cents to $3.62 in New York Stock Exchange composite trading.
