There's never a moment's peace for the board members at MCI Inc. (Nasdaq: MCIA.PK). One minute they're checking out the going price for a few million trees (see MCI to Ebbers: Timberrr!), and the next they're looking over their collective shoulder at a potential acquisition.

Holding company Leucadia National Corp. (NYSE: LUK), which already owns WilTelCommunications Group Inc. (Nasdaq: WTEL), has applied for regulatory clearance to buy a majority of MCI's shares (see Leucadia Considers Bid for MCI, issued by MCI, and Leucadia to Acquire WilTel).

Leucadia told the carrier that it intends to seek clearance from the Federal Trade Commission and Antitrust Division of the U.S. Department of Justice to own more than half of the carrier's common stock. It needs such clearance because of its ownership of WilTel, another infrastructure-based long-distance carrier.

Today, it would cost $2.7 billion to buy more than half of MCI, and that's without a premium on the stock's current value of $17.05. It's unclear whether Leucadia currently holds a slice of MCI, but if it does it's less than 5 percent, as any holding that size has to be declared.

But is Leucadia just flirting, or will it follow up on its intentions? Super-clean Lehman Brothers analyst Blake Bath is unconvinced the process will go much further.

In a research note rushed out before a long soak in the tub, he questioned whether Leucadia has the financial muscle to make such an acquisition, and doubted the consolidation of WilTel and MCI was on the cards.

"We are cautious on the likelihood that this announcement will trigger meaningful consolidation in the industry. Leucadia has not responded to MCI's press release, and we are skeptical that Leucadia currently has the resources to fund such a purchase," noted the analyst as he lathered up. "A WilTel/MCI combination would not produce meaningful synergies for the two companies, nor would it improve the overall industry pricing environment, in our view."

But the announcement bumped up Leucadia's stock by $1.12, or 2.3 percent, to $50.05, valuing the firm at $3.55 billion. It currently has cash assets of $346 million and recorded a net profit of $97 million in its most recent financial year (ended December 31, 2003).

MCI, meanwhile, has found it a tough market since it emerged from bankruptcy protection in April and is actively looking to maximize its financial position in various ways (see Roscitt Bags $8M as MCI Cuts Jobs, MCI Posts Q1 Loss, and MCI Starts a New Chapter).

MCI isn't commenting any further at this stage, as it says Leucadia's move is just an application, and not anything material for the MCI board to consider. But should Leucadia proceed any further, its plans could be slowed down or even halted by MCI's "Shareholders' Rights Plan," which it introduced as it emerged from Chapter 11.

That plan was, according to an official release from April, "designed to protect company shareholders in the event of takeover activity. Under the plan, shares of MCI Common Stock would be made available to shareholders at a reduced price should anyone acquire 15 percent or more of outstanding shares of that stock."

How's that for crystal balls? "MCI's Board believes that the Rights Plan represents a sound, reasonable and customary means of safeguarding the interests of our shareholders," said MCI's chairman Nicholas Katzenbach in the April statement. "It is designed to ensure they realize the long-term value of their investment. The Rights Plan encourages anyone seeking to acquire the Company to treat all shareholders fairly."

Telecom is just one market in which Leucadia has holdings. It also owns firms in the healthcare and real estate sectors, and has a copper mine and a winery... but no forests at present.

— Ray Le Maistre, International News Editor, Light Reading