Pressure mounted Thursday for Verizon to sweeten its offer for MCI after Qwest bumped up its bid for the long-distance provider.
Bruce Berkowitz of Fairholme Capital Management, which owns 3.5 percent of MCI, said Verizon should pay $30 per MCI share, far above its $20.75 a share bid.
Leon Cooperman, whose Omega Advisors hedge fund controls nearly 3 percent of MCI, also called for a more competitive offer from telecom giant Verizon.
“Unless Verizon raises their offer, they are out of the picture,” he said.
Verizon declined to comment Thursday.
Qwest’s revised bid is for $8.45 billion or $26 per share, including $15.50 in stock and $10.50 in cash.
Verizon’s $6.75 billion offer includes $14.75 in stock and $6 in cash. MCI’s board accepted that offer in mid-February, but its major shareholders have complained the price is too low.
In a prepared statement Thursday, MCI said it would take until March 28 to decide between the two bidders.
Qwest chief executive Richard Notebaert went on the offensive in a day-long stream of news interviews on Thursday.
He rejected assertions by some analysts that the Denver-based phone company is building a house of cards and overleveraging itself by adding another $455 million in cash to its latest bid.
Qwest’s initial offer had been $8 billion.
“Financing has not been an issue,” Notebaert said in an interview with The Denver Post. “We have had to turn people away.”
But Ivan Feinseth, director of research at Matrix USA in New York, disagreed.
“Qwest is making an offer that they can’t afford to win,” Feinseth said. “This is a bankruptcy waiting to happen.”
Qwest’s stock dropped to $3.74 on Thursday.
Analysts say MCI’s board will be communicating with Verizon chairman Ivan Seidenberg up to the March 28 deadline in an effort to convince Verizon to sweeten its bid.
If MCI’s board decides that Qwest’s bid is superior, Verizon will have five days to decide whether to hold fast, up its price or withdraw. Before it agrees to a Qwest acquisition, however, MCI will have to pay a $200 million break-up fee to Verizon.
Tom Friedberg, a Denver- based independent telecom consultant and former US West employee, said Qwest’s new bid may be too sweet.
“If Qwest wins MCI, the MCI shareholders will come out much better because of higher cash awarded and increased dilution of Qwest stock,” Friedberg said. “This is becoming a take-under of Qwest.”
Bloomberg News contributed to this report.
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.
