In an about-face, MCI said Wednesday it would reopen talks with Qwest for the next two weeks, reconsidering an $8 billion merger bid that MCI had previously snubbed.
“They had to do this because if they didn’t it would be a breach of their fiduciary duty,” said Joseph Pojanowski III, who holds 635 shares of MCI and sued the company in a Delaware court after Verizon agreed to buy MCI for a lower bid of $6.75 billion on Feb. 14.
Some experts continue to doubt Qwest’s ability to lure MCI from Verizon, a bigger and financially stronger merger partner that is giving MCI until March 17 to hold talks with Qwest.
Richard Notebaert, chief executive of Denver-based Qwest, said he was “pleased” at MCI’s decision to reopen talks but questioned whether MCI will go through the motions “as opposed to a meaningful evaluation of our offer.”
MCI’s reply challenged Notebaert’s insinuation: “Today, some 20 MCI representatives, including advisers, met with Qwest for the better part of a day in … meetings that outlined a process and next steps for conducting a thorough review. We believe that constructive dialogue – rather than rhetoric – is in everyone’s best interest.”
Notebaert has been touring the East Coast touting Qwest’s bid. Tuesday, he pitched it to more than 100 shareholders and analysts in New York. Wednesday, Notebaert met with members of Congress on the same day a House committee grilled the CEOs of major telecommunications companies – including MCI and Verizon – about how pending telecom mergers would affect consumers.
Notebaert is waging a fierce battle on several fronts by sweetening Qwest’s bid, reaching out to MCI shareholders and lobbying lawmakers. He calls the Verizon-MCI and SBC-AT&T mergers a “duopoly” that would crush competition.
Notebaert’s tactics have kept Qwest in the game so far, but it is unclear for how long.
New York-based Verizon, which provides telecom services in the Northeast and Mid-Atlantic regions, has a $101 billion stock value.
Qwest, which serves 14 Western and Midwestern states, is valued at $7 billion. Verizon could easily increase its offer to match or exceed anything Qwest puts on the table, said Tavis McCourt, senior telecommunications analyst at Morgan Keegan & Co.
“If it comes down to the MCI board liking the Qwest offer a little more, I am sure we will see a counterbid by Verizon,” McCourt said.
Terms of MCI’s Feb. 14 merger agreement with Verizon allow MCI – with a current stock value of $7.5 billion- to enter discussions with another party if the talks could lead to a superior proposal, although there would also be a $200 million breakup fee.
Qwest shares closed at $3.93 Wednesday, down 12 cents. MCI was up 9 cents, at $23.45, and Verizon climbed 22 cents, to $36.47.
Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com.
