Qwest has hired a New York-based proxy solicitation firm, The Altman Group, which – among other services – helps companies research and attempt to sway shareholders of target companies in hostile takeover bids.
The Altman Group has begun calling smaller institutional investors of MCI who could become swing votes if Qwest launches a hostile bid for MCI.
The callers are asking MCI shareholders how much stock they own in order to gather intelligence for Qwest’s next move, which could include an increased bid for MCI or a hostile takeover attempt.
“They are pulling out all the stops,” said Tim Gilbert, an analyst with Principal Global Investors of Des Moines, Iowa, referring to Qwest.
Gilbert said that Qwest could increase its bid past $9 billion and force MCI back to the negotiating table.
MCI’s board spurned Qwest’s $8.45 billion takeover offer and accepted a $7.64 billion bid from New York-based Verizon on Tuesday.
“We are studying both offers and we think for the moment that both are insufficient,” said Arturo Elias, spokesman for Mexican billionaire Carlos Slim, told The Denver Post on Wednesday night. Slim owns 13.7 percent of MCI’s stock.
Qwest’s board met Wednesday morning, but the company had no official comment.
The Denver-based phone company, which operates in 14 states, has several options in a hostile bid.
It could launch a campaign to persuade a majority of MCI shareholders to vote against the Verizon-MCI deal at a shareholders meeting to be held in June or July.
Or, Qwest could go directly to MCI shareholders with a tender offer to buy a majority of MCI’s stock. MCI, based in Ashburn, Va., has a “poison pill” to dissuade hostile bidders, but it can be overcome.
MCI’s board twice rejected Qwest in favor of a lower Verizon offer, in part because Verizon is a $98 billion company with a vast wireless network that could become part of the services sold to MCI’s corporate clients. Qwest, on the other hand, is worth $7 billion, is saddled with more than $17 billion in debt and has no wireless operations of its own.
Some analysts question whether Qwest can afford to win the MCI bidding war and survive the relentless competition in the telecommunications industry.
“Now that you’ve taken the beachhead, who pays for the troops of occupation?” said Richard Nespola, chief executive of the Kansas-based TMNG consulting firm. “Its main competitor, SBC-AT&T, surrounds Qwest’s service territories.”
Investors are betting that MCI will be sold for somewhere between what Verizon and Qwest are currently offering.
MCI shares rose 67 cents to close Wednesday at $24.45. Verizon is offering $23.50 per MCI share, while Qwest is offering $26.
Both bids include a 40-cent dividend that MCI has already paid to its shareholders.
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.
