Verizon, MCI Merger Back on Track

by Ed Oswald

May 2, 2005, 11:36 AM

In what could be the final move in the buyout drama that is entering its third month, Verizon and MCI announced Monday that they had reached a new agreement worth $8.45 billion. The board of MCI declared the bid as superior to one from Qwest and recommended that shareholders approve the deal.

However, several shareholders have made it clear that they will vote against any deal that is less than what Qwest has already offered. The company's latest bid for MCI stood at $9.9 billion, which according to Qwest was its "final offer."

"We note MCI's concerns about the impact on its business of the present uncertainty about its future. Verizon is committed to a business plan for MCI that will achieve cost savings in an orderly fashion while maintaining the integrity and scope of MCI's services," Verizon CEO Ivan Seidenberg said in a statement.

Trying to allay shareholder fears that MCI would simply be absorbed by Verizon, Seidenberg said, "we believe Verizon's commitment to build upon MCI's strengths will effectively address the concerns expressed by MCI's customers."

"From the standpoint of risk versus reward, Verizon's revised offer presents MCI with a stronger, superior choice," said Nicholas Katzenbach, MCI Board Chairman. "Shareholders receive enhanced value with greater assurance that the transaction will create additional shareholder value."

The board also claimed that several business customers had expressed concern with a Qwest merger, which factored into their decision. According to MCI, several corporations had requested termination of their contracts in the event Qwest won the bidding process.

Qwest responded with a terse statement accusing MCI of being "more interested in bending to Verizon's will than serving its shareholders."

"It is no longer in the best interests of shareowners, customers and employees to continue in a process that seems to be permanently skewed against Qwest," the company said. "We pursued MCI with tenacity and discipline and feel strongly that our bid would have brought far more value to MCI shareholders."