Qwest Communications International Inc. (NYSE: Q) said in a testy statement today that it has given up the chase for long-distance carrier MCI Inc. (Nasdaq: MCIP), leaving Verizon Communications Inc. (NYSE: VZ), once again, as the apparent winner of a months-long bidding war.
"It is no longer in the best interests of shareowners, customers and employees to continue in a process that seems to be permanently skewed against Qwest,” Denver-based Qwest said in the statement.
Qwest’s response comes on the heels of a new $26 per share offer for MCI that now appears to be the winning bid (see Verizon Goes to $26 and Analysts: Verizon Will Ante Up). As late as last week, the MCI board declared Qwest's $9.74 billion package “superior.” (See MCI: Qwest Offer Is Superior.)
The statement marks the second time Qwest has accused the MCI board of offering a moving target with regard to the attributes of a winning bid. It lodged the same complaint at Verizon’s last “winning” bid on March 29 (see And the Winner Is... Verizon!).
“We do note that the declaration of 'superiority' for our $30 offer contained no discussion of the factors the MCI board now describes as reasons $30 is not deemed greater than $26,” today’s statement reads.
Qwest’s statement contains all the vitriol one expects from a spurned suitor or a small child:
“... the latest in a string of decisions reconfirms what we have believed all along: that MCI never intended to negotiate in good faith with Qwest nor maximize shareowner value.”
The deciding factor for MCI may have been the threat of “a large number” of major enterprise customers canceling their contracts in the event of a Qwest buyout. MCI says in a release Monday that “a large number of MCI's most important business customers had indicated that they prefer a transaction between MCI and Verizon rather than a transaction between MCI and Qwest...
“Additionally, as their contracts come up for renewal, a number of customers have also requested rights to terminate their arrangements with MCI in the event of a Qwest transaction."
"From the standpoint of risk versus reward, Verizon's revised offer presents MCI with a stronger, superior choice," says MCI board chairman Nicholas Katzenbach in the release. "Shareholders receive enhanced value with greater assurance that the transaction will create additional shareholder value."
But Qwest believes the MCI board has taken its cues from Verizon all along, never intending to accept a Qwest offer.
“By reportedly allowing Verizon to instruct MCI to impugn Qwest, it is only fair to conclude that MCI is more interested in bending to Verizon's will than serving its shareholders,” the statement reads.
Neither Qwest nor Verizon spokespeople would comment on Qwest’s decision to withdraw.
Also in classic “spurned suitor” fashion, Qwest believes it was just misunderstood. “... several of the statements that the MCI board made in justifying its decision to not accept Qwest's merger proposal do not accurately reflect the positive trends in the Qwest business.”
The company hinted at intentions to seek other acquisition targets now that MCI is off the table. "We will also continue our efforts to strengthen our position as a national provider of communications services with other interested third parties.”
Investors were not exactly applauding Verizon’s victory. Verizon stock closed down 83 cents at $34.97 Monday, while Qwest stock closed up 5 cents at $3.47.
— Mark Sullivan, Reporter, Light Reading