And the Winner Is... Verizon!
This morning, MCI announced its intention to walk down the aisle with Verizon, accepting that company's latest bid of $23.50 per share, or $7.6 billion -- $900 million more than Verizon had previously offered (see MCI Accepts Verizon Bid and Qwest to MCI: Decide by April 5).
The fact that Verizon changed its bid was interesting, given that it had signaled earlier that it wouldn't get in a bidding war for MCI. During a March 7 conference call, Verizon CFO Doreen Toben said: "On a bidding war, I would suggest we have put what we think is the winning bid on the table...
"I would just suggest to you if you look at anything else we’ve done in our history on any other assets that we’ve purchased, be it spectrum, we have typically not gotten into bidding wars."
"Our decision to revise our bid was based on our analysis of what was needed to convince MCI shareholders to approve the deal," writes Verizon spokesman Peter Thonis, in an email to Light Reading on Tuesday. "We felt we needed to provide additional value, protection from downside risk and potential upside -- that's exactly what this deal does."
Still, Verizon's new bid is less than the re-sweetened Qwest deal of $8.45 billion, which was disclosed March 17. Verizon had agreed to allow MCI and Qwest to continue negotiations until March 28 (see Qwest Ups MCI Bid to $8.45B and Qwest to MCI: Decide by April 5).
Despite Qwest's stronger bid, its weaker financial footing made Verizon's the stronger offer in many observers' eyes. MCI's board apparently agreed, choosing perceived long-term stability over immediate gains.
For each MCI share, Verizon's offer includes $8.35 in cash -- a mix of $5.60 in special dividends and $2.75 in plain old do-re-mi -- and 0.4062 shares of Verizon stock, with a guarantee that the stock component will come to $14.75 per share minimum.
That last contingency assigns a virtual stock price of at least $36.31 to Verizon -- more than the company's midday trading price of $35.26 today.
Verizon's new deal also increases MCI's termination fee -- to $240 million, from $200 million, with up to $10 million more to cover expenses.
— Craig Matsumoto, Senior Editor, Light Reading