The vote ends attempts by some investors to prevent the deal and removes one of the final hurdles to the transaction.
In the end, over 88% of MCI shareholders approved the takeover, said Chairman Nicholas Katzenbach at a special meeting at MCI’s headquarters in Ashburn, Virginia.
The approval also means that MCI’s CEO, Michael Capellas, could receive a staggering $39.2m were he to opt to leave the company once the acquisition is completed.
Mr Capellas has been widely credited for engineering the sale of MCI to Verizon. Only a few years ago it seemed unlikely that anyone would wish to purchase disgraced WorldCom, which had collapsed into Chapter 11 owing $11bn, making it the largest bankruptcy in history. Mr Capellas took charge in December 2002 and reorganized the carrier, bringing it out of Chapter 11 in April 2004 when it emerged as MCI.
When SBC Communications announced in February this year that it was to acquire its former parent AT&T for approximately $16bn, the move triggered some long overdue consolidation in the US communications landscape. Once the dust had settled on the SBC and AT&T deal, speculation soon turned to the number-two ranked long-distance phone company in the US, MCI.
Mr Capellas and MCI quickly found themselves in the middle of a bitter tug-of-war battle between US telecoms operator Qwest Communications International and Verizon Communications. Verizon eventually won the day with its $8.46bn bid.
Mr Capellas and his board had backed the Verizon deal all along, arguing that Verizon was the financially stronger partner and strategically it would be a better fit. However, he had to contend with a determined Qwest, which refused to accept the board’s decision and instead concentrated on a hearts-and-minds battle with MCI shareholders to persuade them that Qwest offered the better deal.
With New York-based Verizon seemingly unwilling to budge from its initial $6.75bn bid, Mr Capellas had to contend with rebel shareholders as Qwest progressively upped the ante until its bid topped the $10bn mark. Despite this, he managed to squeeze an extra $2bn out of Verizon, which eventually raised its offer to $8.46bn.
It is thought that Mr Capellas was also involved in negotiating the controversial sale of the largest shareholding of MCI to Verizon, after Mexican billionaire investor Carlos Slim Helu agreed to offload his 13.4% stake in MCI to Verizon, despite his being initially opposed to the Verizon acquisition. Mr Capellas had also been battling to keep the rest of MCI shareholders onside despite the fact that there was a higher offer on the table from Qwest.
The Federal Communications Commission will be meeting in the next few weeks to approve the purchase, and it is believed that the Justice Department may support it as well.
