MCI, the U.S. long distance telephone carrier that recently emerged from the world's largest bankruptcy, became a takeover target on Monday after Leucadia National, a New York-based investment company, sought regulatory approval to acquire a controlling stake in the company.
In a surprise announcement, MCI, formerly known as WorldCom, said it received notice that Leucadia intended to file with the Federal Trade Commission and the Justice Department for clearance to buy at least 50 percent of MCI's common stock.
Leucadia, which is known for its shrewd purchases of undervalued stocks in a variety of industries, acquired WilTel Communications out of the bankruptcy of Williams Communications late last year.
Leucadia's move marks the first takeover interest in MCI since it the communications group disclosed an $11 billion accounting scandal and plunged into bankruptcy in 2002. The news of Leucadia's interest sent the stock soaring.
MCI, the second largest long-distance telephone company after AT&T, emerged from Chapter 11 bankruptcy protection in April, but has struggled as a fierce price war has eroded profit margins and given customers more leverage in bargaining among a greater number of rivals.
Last week, Ashburn, Virginia-based MCI said it lost $388 million in its first quarter and would cut another 7,500 jobs. On Friday, MCI filed suit against Bernard Ebbers, its former chief executive, in a bid to collect more than $300m the deposed executive still owes on $408 million of loans he took from the company.
Mr. Ebbers was ousted in April 2002, largely as a result of controversy over the loans he had taken from the company.
MCI said the waiting period for Leucadia's filing would expire on or near August 9 unless the FTC granted early termination or requested additional information.
Leucadia's other interest's include equity holdings in companies including Finova Group, Carmike Cinemas and HomeFed. Last week, it submitted a letter to Plains Resources proposing that Plains remain a public company with changes in management, governance and capital structure.
In March, Leucadia raised its acquisition proposal for Plains to $18.75 a share from $18.19. Vulcan Capital, a private equity firm controlled by Microsoft co-founder Paul Allen, has offered $16.75 a share for the Houston-based energy concern.