The new offer raises Qwest's original bid by more than five percent. But more importantly, the new bid contains a "collar," or floor, which would preserve a minimum bid value even if Qwest's share price drops further.
Both US West and Frontier had agreed to merge with undersea fiber optic company Global Crossing. This month, however, Qwest made an effort to outbid its rival for both companies, but a precipitous drop in its share price undermined what had originally been a higher all-stock offer.
Nacchio's first bid for the two companies totaled about $45 billion, based on the value of Qwest's stock at its closing price yesterday. At that same share price, Qwest's new offer is worth close to $48 billion, although the company's stock dropped again this morning following news of the sweetened bid.
Global Crossing's offer for the companies was worth $42 billion at the close of trading yesterday.
In letters to the management of Frontier and US West today, Qwest CEO Joseph Nacchio said his new bid should make it clear that Qwest is committed to merging with the two companies.
"Given the clear superiority of our offer to the proposed Global Crossing offer, we believe that it is in the best interests of your shareholders, customers, and employees for you to meet with us as soon as possible," Nacchio wrote to US West CEO Sol Trujillo.
In his letters, Nacchio said his company's new bids should address all the concerns of US West's and Frontier's board of directors.
The increased financial value of the bid, and the collar on the value of the stock transaction, should alleviate worry about Qwest's volatile stock price, he said.
Frontier and US West each said they had received and would review Qwest's new bid.
Global Crossing said it had no plans to modify its own offer as yet, but left the door open to raise its bid later, or even to withdraw from the bidding war altogether.
"We remain committed to our definitive merger agreements and have no plans to take any action at this time," said Global Crossing CEO Robert Annunziata in a statement. "We will assess the value of the latest Qwest bids and determine in due course what, if any, action is in the best interest of our shareholders."
Nacchio assured US West's Trujillo that he and his senior management team would play a key role in governing the combined company.
"We expect, upon consummation of the transaction, to invite you to assume a senior operational role, as well as to become one of the few key people responsible for the creation and implementation of the strategic vision of the combined company," Nacchio wrote.
US West's board indicated on Monday that it was concerned about losing control over the new company if it accepted Qwest's merger offer. In contrast, Trujillo was instrumental in arranging the Global Crossing merger, and would be co-CEO of the combined company if the deal is consummated.
The stock market has frowned on both companies' efforts to acquire US West and Frontier. Financial analysts have said that Qwest has positioned itself well as a high-growth data and Internet company, and would be departing significantly from that solid strategy by acquiring US West.
Nevertheless, Nacchio said today he would not back away from his acquisition quest.
"One of the things I admired about MCI in the early days, when I was a young guy at AT&T, was no matter what the big guys tried to do, they kept coming," Nacchio said in a conference call with reporters.
"That's the kind of company Qwest is. Qwest isn't going away," he added. "We're going to win these."