Two rival bids for MCI Communications Corp have now become a multi-billion dollar poker game where all three parties know that one poorly judged move could have a massive impact on its shareholders. WorldCom Inc has now sent its formal $30bn offer to MCI shareholders. But WorldCom’s president and chief executive Bernard Ebbers acknowledged in his letter to them: MCI may be soliciting your vote in favor of BT’s acquisition of MCI. For the MCI board, the crucial issue is the $450m penalty the company will have to pay to British Telecommunications Plc if it breaks the original merger agreement and recommends the WorldCom offer. Wall Street analysts expect it will leave the decision up to its shareholders – who will hardly need their pocket calculators to work out if a $24bn bid from BT is better than a $30bn alternative from WorldCom. But while BT is in the weakest position, through its 20% stake in MCI it has the ability to make life difficult for WorldCom. An uncontested bid – which would be regarded as a pooling of interests – has massive tax advantages for WorldCom. With so much at stake, a contest is a dangerous gamble. Sooner or later the three parties may have to sit round a table and thrash out a deal.
