Telephone company Verizon Communications Inc. on Wednesday said rival Qwest Communications Inc. was making a “desperate” attempt to buy MCI Inc., but Qwest said its offer was solid amid reports it was about to raise its bid.
Verizon, the largest U.S. telecommunications company, had agreed to buy MCI in a deal valued at $6.6 billion, a price several large MCI shareholders have said was too low. Qwest had bid $8 billion, and sources familiar with the situation had said Qwest would raise its offer soon.
CNBC and The Wall Street Journal reported on Wednesday that Qwest would raise its offer to $26 per MCI share, up from $24.60 previously.
In a letter filed with federal market regulators, Verizon chairman and chief executive Ivan Seidenberg said accounting scandals at Qwest and WorldCom had been driven in part by unrealistic merger promises.
He said Qwest’s bid had “a desperate quality,” and that its claims of $14.8 billion in savings from a MCI deal “do not pass a common sense test.”
“Qwest fails to explain the financial alchemy required to keep Qwest afloat, complete the acquisition of MCI and invest in the business,” Seidenberg said in the letter.
Qwest contends that its bid is a better deal for MCI shareholders, and that a Verizon-MCI purchase along with SBC Communications’ pending purchase of AT&T Corp., would create a duopoly in the market for voice and data services to large businesses.
Qwest chairman and chief executive Richard Notebaert said after Verizon’s letter was released that the company’s activities “over the next 24 hours will demonstrate our commitment to winning MCI,” and “historical commentaries serve no purpose.”
Verizon had granted Qwest and MCI two weeks to discuss Qwest’s bid. If MCI’s board found Qwest’s bid superior, Verizon would have five days to match it. If MCI chooses Qwest’s bid, Verizon would get a $200 million break-up fee.
