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 trackback so far
5:59 PM PT
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.
1 comment so far
5:59 PM PT
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.
Leave a Comment