Long distance provider MCI Inc. said Wednesday it has gotten the blessing of its preferred merger partner Verizon Communications Inc. to talk with Qwest Communications International Inc. about its competing bid over the next two weeks.
The announcement Wednesday came a day after Qwest executives made a direct appeal to MCI investors to pressure MCI to scrap a lower-priced deal with Verizon and reconsider Qwest’s spurned $8 billion bid.
MCI said in a statement its board “remains committed to performing its fiduciary duties and will evaluate Qwest’s position over the next two weeks.” It said it made the decision with the concurrence of Verizon.
In a separate statement, Verizon said it had agreed that MCI may engage in further discussions with Qwest through March 17, but reaffirmed that it thinks it “is the best partner for MCI.”
“Verizon recognizes that it is in the best interests of the stakeholders of both Verizon and MCI to address recent market speculation regarding Qwest’s claims that it can deliver greater value to MCI’s shareholders,” Verizon said in a statement.
“Notwithstanding this speculation, we believe that this process will result in MCI reaching the same conclusion that it reached after seven months of discussions with Qwest. the statement said
Qwest’s latest bid made two enhancements to the cash and stock offer previously rejected by MCI: It would speed up the cash payoff to MCI investors, and provide some downside protection by offering to increase the amount of Qwest stock paid if the market value of those shares declines before the merger is completed.
The Qwest deal values MCI at $24.60 per share, consisting of $9.10 in cash and $15.50 worth of Qwest shares. Verizon is offering $6 in cash and stock currently worth $14.70, valuing MCI at $20.70 per share.
MCI and some investors have expressed concerns about Qwest’s weak financial condition and its uncertain business prospects — which make it unclear whether the Qwest shares used as payment will hold their value as well as Verizon’s stock down the road.