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Regional Bell company Qwest Communications International on Thursday revised its bid to acquire long-distance company MCI, increasing the cash portion of the offer in an effort to upset the deal between Verizon Communications and MCI.
Qwest is still offering $24.60 per share for MCI, but boosted the cash payment from $7.50 per share to $9.10 per share. Qwest didn't increase the overall value of its bid, which is still around $8 billion. MCI had previously rejected the Qwest proposal, accepting instead an offer from Verizon valued at around $6.75 billion.
In a letter sent to MCI's board, Qwest chairman and CEO Richard Notebaert noted that his company has been "denied access to MCI legal, financial and operational information." Nonetheless, Qwest was making a revised proposal that is "even more compelling for your stockholders."
A merger between Qwest and MCI "would create an exciting and important new telecommunications company with a strong market position," he wrote. Such a deal would pass regulatory review faster than a Verizon/MCI deal and "lead to fewer and less extensive divestiture demands." Notebaert also said Qwest will protect MCI shareholders from any potential decline in Qwest stock price.
MCI officials have said that joining with Verizon will produce a strong telecom company that can better compete in a rapidly changing marketplace, pointing out that Verizon is a much larger and financially stronger company than Qwest. Still, some MCI shareholders have objected to the company accepting the lower offer from Verizon, rather than the richer offer from Qwest.
Some analysts have predicted that a new bid by Qwest will force Verizon to increase its offer, but the company hasn't indicated whether it will do so. "I think most of us expected both Verizon and Qwest to fight for MCI over days or weeks and maybe even drive the price up. With Verizon and Qwest both wanting MCI, there is obviously a lot more value to squeeze out of this deal," telecom industry analyst Jeff Kagan said in an E-mail statement after Qwest's revised bid.