Qwest fights Verizon for MCI

Despite having three of their previous offers rejected, Qwest Communications has continued to pursue its effort to acquire MCI, having nearly completed arrangements for an equity infusion of $2 billion in order to make its bid more attractive.

Most of this additional equity would be contributed by current MCI shareholders who favor Qwest’s bid and is conditional on endorsement of the bid by MCI’s board of directors.

There are still obstacles Qwest must overcome, however. Under the terms of a merger agreement MCI and Verizon signed a few weeks ago, Verizon can force a shareholders’ vote on its offer even if MCI were to decide to take Qwest’s bid.

Consequently, MCI would need to actively reject the Verizon offer before being free to consider the Qwest bid. There are several ways Qwest can advance their efforts.

They can raise their current offer. They can take their current offer or a revised bid directly to MCI’s shareholders.

Or they can stage a proxy fight to attempt to take control of MCI. Some believe that the third option can be avoided if Qwest can gain MCI’s board of directors’ support for their bid.

Those close to the issue think that might be possible if they can get a commitment for the extra equity from the approximately 30 percent of MCI shareholders who have already expressed their opposition to the Verizon offer, including Carlos Slim, a billionaire who is MCI’s largest stockholder.

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