An acquisition of MCI
will mark the end of
an era in the
On Wednesday, Verizon's CEO, Ivan Seidenberg, wrote a letter to MCI's board of directors criticizing Qwest's bid of about $8 billion for the long-distance giant. In the letter, which was filed with the U.S. Securities and Exchange Commission, Seidenberg said that Qwest's finances were weak and that the company could not prove its claims that savings would result from its buying MCI.
"No wonder there appears to be a desperate quality to Qwest's efforts to acquire MCI--explaining in the future the failure to have delivered on exaggerated promises of synergies is understandably preferable to the stark reality of its current stand-alone financial prospects," he wrote. "Qwest's claims do not pass a common-sense test, and it has so far provided only scant supporting detail."
Qwest's CEO Richard Notebaert issued his own statement on Wednesday reiterating his view that a Qwest-MCI deal would create a financially strong company with significant cash flow and offer investors a unique growth opportunity.
"Our activities over the next 24 hours will demonstrate our commitment to winning MCI," he said. "It is unfortunate that some in the process feel MCI shareholders should be deprived of the true value of their asset. MCI is a valuable property and shareholders deserve the present and future value that Qwest is committed to deliver. Let fairness, economics, and the best interests of shareholders decide this matter."
Last month MCI, but MCI shareholders have been critical of the deal, saying it's too low. Under pressure from shareholders, MCI entered into talks with Qwest over its bid. The deadline for negotiations to end is Thursday.
Earlier this week, it was reported that Qwest plans to raise its offer. CNBC has reported that Qwest is likely to raise its bid to about $26 a share. Qwest's current offer for MCI is roughly $24.60 a share, or nearly $8 billion. Analysts expect most of this increase to be in cash rather than more Qwest stock.
"What MCI doesn't like about the Qwest offer is the stock," said Tavis McCourt, an analyst with Morgan Keegan. "For Qwest to even have a chance of winning MCI, they need to increase the cash portion of the deal."
Neither MCI nor Qwest would comment on a revised offer.
Analysts believe that regardless of a new bid from Qwest, Verizon is still the front-runner.
"Verizon may have to up their bid modestly," McCourt said. "But I'd be very surprised if Verizon doesn't walk away with the MCI assets."