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Verizon may drop MCI acquisition attempt
By Juan Carlos Perez

Sounding like a spurned suitor, Verizon Communications Inc. on Monday said it will drop its efforts to acquire MCI Inc. if the latter's board deems superior a competing offer from Qwest Communications International Inc.

The message was conveyed in a short statement sent to the press and in a long letter Verizon's Chairman and Chief Executive Officer Ivan Seidenberg sent to his counterparts over at MCI: Chairman Nicholas deB. Katzenbach and CEO and President Michael Capellas.

This is the latest scene in a drama that began in mid-February, when Verizon agreed to buy MCI in a stock-and-cash deal worth around US$6.7 billion. Since then, Verizon and Qwest have been trying to outbid each other. The most recent offer was put on the table last Thursday when Qwest upped its bid to around US$8.9 billion. This topped Verizon's current offer of around $7.6 billion, which MCI's board had accepted.

"Verizon believes that the decision facing MCI is not about the math of a particular moment in time; it is about good business judgment, the best interests of shareowners and the long-term viability of the new company," Verizon's Monday statement reads. "Based on these criteria, Qwest has submitted what we believe to be an inferior offer."

If the MCI board declares Qwest's offer superior, Verizon would conclude that the MCI board is interested in short-term investors and not on the company's long-term strength, according to the statement. "Should this occur, we would no longer be interested in participating in such a process," Verizon's statement reads.

Verizon also urges the MCI board not to capitulate to Qwest's "artificial deadline" for deciding which bid is superior. This refers to Qwest's statement on Friday in which it says it expects MCI's board to notify it of its decision regarding Qwest's offer by Tuesday of this week.

In his letter, Seidenberg says that if MCI is acquired by Verizon, the combined company will be much more solid and will be in much better position to compete, compared with a combined MCI/Qwest.

"Not only would Verizon's financial position protect the new company from the inevitable operational and financial challenges as new business models emerge, but it would also allow Verizon/MCI to invest the substantial sums required to pursue exciting new opportunities in IP and wireless products and services," Seidenberg wrote.

Posted April 5, 2005 04:40 PM |