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MCI board rejects Quest bid, will stick with Verizon

The board of MCI Inc rejected an US$8.9 billion buyout proposal from Qwest Communications, opting instead to stick with a US$7.5 billion offer from Verizon Communications Inc, a Qwest spokesman said.

Qwest Communications International Inc., which has made three bids for MCI, plans to evaluate the situation before deciding its next move, Qwest spokesman Steve Hammack said on Tuesday night.

"We are weighing our options, and shareholders will dictate the next steps in the process," Hammack said. "MCI's board of directors has chosen to reject what we believe is a superior offer to acquire MCI."

MCI spokesman Peter Lucht declined comment. Verizon spokesman Peter Thonis read a statement early yesterday that said the company was "pleased."

"We are looking forward to working with MCI shareholders to get the deal done promptly," the statement said.

Qwest issued a midnight Tuesday deadline to MCI last week when it raised its bid by nearly US$500 million to US$8.9 billion, or about 20 percent more than the sweetened Verizon bid that MCI accepted just days earlier.

The company reiterated its deadline on Tuesday, a day after Verizon issued an ultimatum saying it would walk away from the deal and further negotiations should MCI declare the Qwest offer superior.

Verizon and Qwest, two of the nation's biggest telephone companies, have been battling for about two months over Virginia-based MCI, which operates a national fiber-optic network serving a lucrative roster of government and corporate clients.

MCI's board has been worried about Qwest's financial troubles, including a US$17 billion debt load, and the long-term value of the Qwest shares that will be used as partial payment for the buyout. As a result, MCI has twice accepted lower bids from Verizon rather than agreeing to merge with Qwest.

Qwest's most recent offer of cash and stock is worth US$27.50 a share. Verizon's latest stock-and-cash bid values MCI at US$23.10 per share, up from US$20.75 under the original deal those companies reached in mid-February.

The Wall Street Journal reported on its Web site that MCI officials had asked Qwest CEO Richard Notebaert to raise his offer from US$27.50 to US$30 per share, but that he had declined.

The WSJ report did not cite sources.

Both Qwest and Verizon have hired proxy consulting firms amid speculation that Qwest may seek a direct vote by MCI shareholders if it is rejected by MCI's board.
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