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Summary:

Qwest is upping the ante and is willing to offer $8 billion for MCI, in hope that this would finally scuttle MCI’s deal with Verizon. While the deal is marginally higher than the $7.8 billion Qwest offered earlier, there are some key differences. Associated Press has […]

Qwest is upping the ante and is willing to offer $8 billion for MCI, in hope that this would finally scuttle MCI’s deal with Verizon. While the deal is marginally higher than the $7.8 billion Qwest offered earlier, there are some key differences. Associated Press has all the details, but there are salient highlights.

Originally Qwest had offered $24.60 a share to MCI shareholders, which included $7.50 a share in cash, $1.60 a share in special dividends and $15.50 of Qwest common stock based on a fixed exchange ratio of 3.735 Qwest shares per MCI share and Qwest’s recent share price of about $4.15.

According to the new deal, the stock portion of the deal will hold even if Qwest shares fall below $4.15 per share. Instead of giving MCI shareholders four quarterly dividends of 40 cents and a closing payment of $7.50 a share, Qwest will give out $6 per share one-time payment upon shareholder approval and a closing payment of $3.10 a share.

This doesn’t look right – I have a feeling it exposes Qwest to machinations of Wall Street Machiavellis. Comments/Thoughts anyone?

  1. Hi Om, in repsonse to your call for comments here is my take. Qwest will never win the bid, given 1) Verizon’s ability to slightly raise or modify its bid; and 2) MCI’s desire to appease shareholders who don’t want to see the combined company fizzle post merger with a more weakly positioned company. I discuss my view in a little more detail here.

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  2. Qwest Will Not Win MCI (and a Comment on Outsourcing)

    The following is all based on my opinion only, and should be considered purely as my speculation; it should not be taken as a recommendation to actually buy or sell any stock.

    COMMENT:
    AUTHOR: Om Malik

    It does expose Q to the machinations or something like that. The collar effectively transfers the risk from the MCI shareholders to the Q shareholders and makes this a much sweeter deal for MCI. Combined with the facts that the GSA has approved Q to bid on government contracts, the Q bid is over $1B more, and the Q deal would be completed in about half the time they still have a very good chance of winning this.

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