Qwest has made a new bid for MCI in the hope of luring it away from rival Verizon.
The new deal continues to offer $24.60 per share in cash and stock but comes with a guarantee of that purchase price, unlike the rival bid from Verizon. It would also allow for a faster payout to MCI stockholders than Qwest's previous bid.
MCI executives on 14 February accepted a deal from Verizon worth about $6.7 billion, arguing that the larger and more profitable Verizon would be the best long-term fit for MCI. But stockholders have still to approve it.
Qwest's new letter to the MCI board guaranteed the $24.60 as a locked-in price, called a "collar", instead of a bid based on the fluctuating value of Qwest's stock. Qwest's offer of $15.50 worth of its stock has not changed, but its new bid would give MCI stockholders $6 in cash per share at approval of the agreement and $3.10 at closing.
Qwest CEO Richard Notebaert, called the new proposal "even more compelling for your stockholders," in the letter to MCI's board. MCI issued a short statement yesterday saying: "MCI's Board will conduct a thorough review of the Qwest offer, as it has with all previous offers."
Qwest and Verizon are locked in a battle for MCI after rival regional Bell company SBC announced at the end of January its acquisition of AT&T for $16 billion. MCI and AT&T have both focused on enterprise customers, long-distance service and international data networks, while Qwest, Verizon and SBC have traditionally provided local phone service.
Verizon also issued a statement: "Verizon has a signed agreement with MCI and a proven track record of completing transactions that create value for shareholders, customers and employees."
Notebaert, in his letter to the MCI board, argued that a Qwest/MCI merger would yield better cost savings than a Verizon-MCI merger, and because Qwest and MCI have fewer overlapping services, a merger between the two would face a simpler regulatory review than a Verizon acquisition of MCI.