Qwest offers $8 Billion for MCI


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?


Steve Castellano

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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