NEW YORK – Long distance provider MCI Inc. (MCIP) said Wednesday it has gotten the blessing of its preferred merger partner Verizon Communications Inc. (VZ) to talk with Qwest Communications International Inc. (Q) about that company's revised $8 billion bid to acquire MCI.
The announcement came a day after Qwest executives made a direct appeal to MCI investors to pressure MCI to scrap a $6.7 billion deal reached with Verizon two weeks ago.
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 did not, however, indicate whether it might consider increasing its own offer should MCI decide the Qwest deal is now superior.
"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 responded to Wednesday's developments by saying, "We look forward to sitting down and having thoughtful and meaningful discussions with MCI."
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 shares rose 14 cents to $23.50 in morning trading on the Nasdaq Stock Market (search). Qwest shares fell 6 cents, or 1.5 percent, to $3.99 on the New York Stock Exchange (search), while Verizon shares fell 1 cent to $36.24.
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.
On Tuesday, Qwest officials presented their plan directly to Qwest and MCI investors, detailing more than $10 billion in cost savings driven largely by the elimination of up to 15,000 jobs.
The executives also repeatedly expressed frustration that MCI had thus far refused to discuss the offer.
"We haven't heard anything from them since the Thursday before the Super Bowl," Qwest Chief Executive Dick Notebaert said at the meeting in New York. "We have a superior bid, and even if you don't think it's superior, there's clearly potential for a superior bid."
Notebaert also signaled that Qwest might be willing to sweeten its bid, but only if MCI agreed to meet. He declined to discuss whether Qwest might take its offer directly to MCI investors if no talks are held.
Many attendees at Tuesday's meeting downplayed the concerns about Qwest's financial health, while others expressed annoyance that MCI has declined to show a willingness to speak with Qwest or at least explain its stance more publicly.
Qwest, the dominant local phone company for the Rocky Mountains and Pacific Northwest, also reiterated the company's stance that its deal likely would draw less worry about lost competition from government regulators than would the acquisition of MCI by Verizon.
An executive for Verizon, the dominant local phone provider in the Northeast and Mid-Atlantic, rejected those assertions on Monday, arguing that a Qwest-MCI combination was likely to encounter heavy opposition from regulators.