Verizon on Tuesday filed for a vote by MCI shareholders on its proposed acquisition of MCI and started the clock on what looks to be a dramatic finale between Verizon and Qwest on the bidding war for the nation’s No. 2 long-distance provider.
Verizon may adopt a so-called “eBay” strategy and wait until the last possible minute to increase its offer for MCI and fend off Denver-based Qwest, one observer said.
“I subscribe to the eBay theory,” said Richard Nespola, chief executive of the Kansas-based TMNG consulting firm. “Why do something now that lets your adversary read your cards?”
New York-based Verizon had no comment Tuesday on its bidding strategy. In its filing with regulators, Verizon said it would issue 132 million shares to complete the MCI transaction.
Verizon also laid out the background of its deal for MCI, including the revelation that on April 5, MCI’s board told Qwest that if it improved its bid to $30 a share and provided additional guarantees about closing, it would declare Qwest’s proposal “superior” to Verizon’s.
Qwest declined to move off its $27.50 bid, and Verizon’s merger deal was accepted by MCI at $23.10 a share.
|
VIDEO
|
|
|
“We believe we put a superior bid on the table at $27.50 that was not given any consideration by the (MCI) board,” Qwest spokesman Tyler Gronbach said.
Analysts expect Verizon to increase its offer for MCI after announcing a deal last weekend to buy out Mexican billionaire Carlos Slim Helu, MCI’s largest shareholder, for $25.72 a share – all cash.
“The probability has risen considerably that Verizon will increase its bid for MCI, although the company could wait until it gets closer to the pending MCI shareholder vote,” Smith Barney’s Michael Rollins wrote in an investment note Monday.
If it offers more cash, Verizon could revise its bid only 10 days before an MCI shareholder meeting to approve the buyout, which will probably occur in late June or early July.
Increasing the stock portion of the Verizon bid would require a more complicated filing and could be done 20 days beforehand.
Verizon is working with a proxy- solicitation firm to collect information from MCI shareholders on what Verizon must bid to win.
Qwest already is anticipating Verizon’s next move by raising more cash to sweeten its offer for MCI.
Qwest’s most likely course is a campaign to defeat the Verizon-MCI deal, while at the same time making a formal “exchange offer” to buy out MCI shareholders for a combination of stock and cash.
The exchange offer would be largely symbolic, though, because Qwest would not be able to overcome MCI’s “poison pill,” an anti-takeover defense. But if shareholders voted down the MCI- Verizon deal, then MCI’s board would have to consider Qwest’s offer.
Meanwhile, the saber-rattling continues. Qwest on Tuesday blasted MCI chief executive Michael Capellas, who urged MCI shareholders to approve the merger in a letter within Verizon’s filing.
“Mr. Capellas and the MCI board ‘unanimously’ support the creation of two classes of shareholders,” Qwest said in a filing, referring to Verizon’s buyout of Slim’s stake.
MCI declined to comment Tuesday.
At least one analyst surmised that Qwest may not be so unhappy about Verizon being MCI’s largest shareholder.
“Qwest’s best-case scenario is to win control of the company and have Verizon as an angry shareholder,” said Tim Gilbert, an analyst with Principal Global Investors of Des Moines, Iowa. “Or maybe they like having Verizon on the board because they may buy Qwest-MCI out in the end.”
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.
