MCI has already accepted a $6.75bn bid from New York-based Verizon Communications, but after a highly effective campaign by Qwest to convince MCI shareholders to put pressure on MCI’s board to reconsider Qwest’s bid, MCI received Verizon’s permission to open up talks again.
This led to Qwest adding an extra $450m to its $8bn bid, the second time in the space of three weeks it had sweetened its offer. The extra cash was added to the pot after it looked clear that MCI’s board was going to refuse the already sweetened offer.
MCI’s board of directors had been expected to respond to the new deal by March 28 after a thorough review of the revised offer, which topped the Verizon offer by $1.7bn.
Yet in a sign that nerves are starting to fray, MCI has refused to continue talks with Qwest after the two-week window granted by Verizon expired last Thursday.
In addition, Verizon’s Chairman and Chief Executive Ivan Seidenberg stepped up his attack on Qwest. In a letter to MCI’s management, Seidenberg said Verizon was committed to closing its $6.75bn agreement to buy MCI and will not be distracted by Qwest’s histrionics, false statements and grossly exaggerated synergy claims.
Yet MCI’s decision to go dark has clearly angered Qwest. Its CEO, Richard Notebaert, has written a sharply worded response and has called on MCI to immediately engage in negotiations to finalize the proposed merger agreement between MCI and Qwest.
Your advisors tell us that MCI has gone ‘dark’ and refuses to continue to speak with Qwest about our proposal [to acquire MCI].
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It is disturbing that Verizon and MCI are so concerned about allowing MCI to expeditiously and transparently evaluate Qwest’s proposal fully that they do not avail themselves of the provisions in the Verizon-MCI merger agreement to do so.
If the MCI board of directors truly wishes to evaluate Qwest’s proposal, there is no legally valid excuse not to continue the exchange of information, Notebaert said in the letter.
Essentially, MCI’s management remain convinced that their decision to press ahead with the $6.7bn deal already agreed with Verizon is the right one. However, the pressure being exerted by Qwest may mean that Verizon could end paying slightly more than the $6.75bn it put down on the table in mid February.
