NEW YORK – MCI Inc.'s (MCIP) board on Tuesday accepted a sweetened takeover offer from Verizon Communications Inc. (VZ), shunning rival Qwest Communications International Inc.'s (Q) offer and ending six weeks of corporate offers and counteroffers.
Verizon reportedly raised its offer by $1 billion to $7.6 billion; the offer Verizon increases the amount of cash being paid and provides protection against a decline in the value of the Verizon shares MCI investors will receive, according to reports Tuesday from CNBC and The Wall Street Journal, each citing unidentified sources.
Verizon, the largest U.S. telecommunications company, declined comment on the reports.
The new offer would value MCI at $23.10 per share, up from the $20.75 a share, that Verizon originally agreed to pay when the companies stuck a deal in mid-February.
Qwest has offered $8.45 billion, or $26 a share, in an unsolicited counterbid which MCI's board has been reluctant to embrace out of worries about Qwest's questionable financial health and business prospects. Qwest gave MCI until April 5 to accept or reject its $8.45 billion bid.
"It's a step in the right direction. It's not over," said Bruce Berkowitz, whose Fairholme Fund owns 11 million MCI shares.
"Qwest still has a superior offer. Qwest's synergies are real. MCI is hugely valuable to both Qwest and Verizon. The highest bid should win," Berkowitz said.
Both Verizon and Qwest see MCI as a foothold into the market for selling voice and data services to large businesses. Qwest, the fourth-largest U.S. local telephone company, also sees a chance to reduce its $17 billion debt and increase its weak cash flow through a merger with MCI.
Several large MCI shareholders have criticized the Verizon bid as too low and encouraged Qwest's bid. Verizon has said its deal offered the better value to shareholders. It has criticized Qwest's estimates of financial benefits from a MCI deal, including $14.8 billion in cost savings, as "modern fiction."
Qwest's offer valued MCI at $26 per share, including $10.50 in cash and $15.50 in Qwest's shares. The deal value included a dividend that MCI paid last month, and a clause allowing Qwest to adjust the ratio of shares it issues based on its share price.
Reuters and the Associated Press contributed to this report.