MCI Inc. Chief Executive Michael Capellas is getting a $13.5 million bonus for 2004 after leading the former WorldCom out of bankruptcy and putting the long-distance phone company up for sale, a process which has triggered a bidding war.
Capellas was awarded $5 million in cash plus 357,241 shares of restricted MCI stock, currently worth nearly $8.5 million, in addition to his annual salary of $1.5 million, according to documents filed with the Securities and Exchange Commission Friday.
The payments, approved by the MCI board's compensation committee over the past week, were disclosed two days after MCI announced that it would meet with Qwest Communications Inc. to discuss a takeover bid worth $1.25 billion more than what Verizon Communications Inc. agreed to pay for MCI.
The restricted stock cannot be sold immediately. The shares vest in stages over a four-year period.
The filing also outlined bonuses and stock grants for four other senior MCI officers ranging up to $4.5 million in cash and restricted stock for Wayne Huyard, president for U.S. sales and service.
MCI, based in Ashburn, Va., has set a two-week time frame for talks and a full evaluation of the revised bid of $8 billion in cash and stock submitted last week by Qwest, the local phone company for most of the Rocky Mountains and Pacific Northwest.
Verizon, which dominates the Northeast and Mid-Atlantic, agreed to pay stock and cash currently worth $6.75 billion in a deal with MCI announced in mid-February.
Verizon's bid is currently worth about $20.80 for each MCI share, consisting of $6 cash and the rest in Verizon stock, for a total of $6.8 billion.
Although the Qwest offer is higher priced, MCI has been hesitant to change partners out of concern that Qwest is in weak financial condition and faces a grim business outlook, making its shares a riskier proposition to accept as payment compared with Verizon's stock.
However, MCI investors have pressured their company to entertain Qwest's offer because a bigger chunk of the payment is in cash, and Qwest has offered some downside protection on the value of the stock payment.