Qwest chief executive Richard Notebaert said Monday he is disappointed that MCI rejected Qwest’s higher bid and instead chose to be acquired by Verizon.
“I respect the decision of the MCI board, and we are moving on,” Notebaert said in Boulder, where he spoke at an industry conference.
Notebaert wouldn’t say what Qwest – which is carrying $17.2 billion in debt and facing customer losses to wireless, cable and other companies – will do now.
MCI, the nation’s second-largest long-distance company, chose New York-based Verizon’s $6.75 billion cash and stock offer over a reported Qwest bid of $7.3 billion.
A source close to Qwest said Monday that early this month, the Denver- based telecommunications company offered $6.3 billion in cash for MCI. The source said banks were lined up to provide the needed financing.
On Friday, Qwest upped its bid to $7.3 billion in cash and stock. That offer valued MCI at $24.60 a share, including $15.50 a share in Qwest stock, $7.50 per share in cash, and a $1.60 per share dividend, the source said.
Verizon’s bid values MCI at $20.75 a share. It includes $4.8 billion in stock, $488 million in cash and $1.46 billion in dividends. MCI also will pay quarterly and special dividends totaling $4.50 per share.
Leon Cooperman, one of MCI’s largest shareholders, said Monday that MCI is worth more than Verizon has offered and suggested he might try to block the deal.
|
VIDEO
|
|
|
Cooperman, whose Omega Advisors is MCI’s fifth-largest stockholder with 9.3 million shares, said he wants to know more about both of Qwest’s offers. He said he will take part in Qwest’s earnings call today and try to get more details on the offers.
“A lot of MCI shareholders aren’t happy with this deal,” he said.
Right now, the acquisition can be derailed only if shareholders vote against it or it doesn’t meet regulatory hurdles.
Spokesmen for Denver-based Qwest and Ashburn, Va.-based MCI declined to comment Monday.
But Eric Rabe, a spokesman for Verizon, said Cooperman doesn’t care whether a Verizon-MCI match would be good for MCI. Instead, he wants to make a quick profit on his investment, Rabe said.
The Verizon deal would team MCI with an industry-leading telecom company that has a $100 billion market value, strong balance sheet and good growth prospects.
Janco Partners analyst Donna Jaegers and others said it appeared that Qwest had been played.
“It certainly looked like they brought Qwest in to get Verizon to pop the question,” Jaegers said.
The source close to the Qwest offer said MCI only allowed Qwest to examine its books Saturday, the day before it accepted the Verizon bid.
Analysts said Qwest’s options are limited, now that the deal has collapsed.
“The problem right now is they have to figure out a way to generate enough free cash flow to pay down the debt,” said Drake Johnstone of Davenport & Co.
Another large phone company such as BellSouth is unlikely to buy Qwest, he said, because of its debt.
The company could sell off one or two of the 14 states it serves, Jaegers said. While buyers would be hard to find for its more rural territories, a state such as Arizona – with its population centers of Phoenix and Tucson – would be attractive, she said.
Bloomberg News contributed to this report.
Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com.
WHAT THEY’RE SAYING ABOUT VERIZON-MCI
“I’m not particularly concerned about someone coming over the top. They have a very high hurdle to meet.”
Verizon chief executive Ivan Seidenberg, asked Monday about the possibility of Qwest’s making a counteroffer for MCI
“Verizon is a much prettier bride.”
Blair Levin, an analyst at Legg Mason Wood Walker and former chief of staff of the Federal Communications Commission
“I’m disappointed, but I respect the decision of MCI’s board. We are moving on.”
Qwest CEO Richard Notebaert, in brief comments after a speech Monday in Boulder
“MCI is worth more than what Verizon is paying.”
Leon Cooperman, whose Omega Advisors Inc. owns about 3 percent of MCI stock
