Qwest, Revising Its Bid, Puts MCI Board on Spot
Qwest Communications International Inc. upped the ante in its quest to take over MCI Inc., launching a revised offer that directly challenges last week's agreement by MCI to be acquired by Verizon Communications Inc.
Now, the question for MCI's board: What constitutes the best offer? MCI's directors will have to choose between a significantly lower offer from a buyer with more financial muscle (Verizon) versus a higher offer from a company that has a high debt load (Qwest).
DIAL A DEAL
? Qwest Sets Its Sights Anew on MCI
2/22/05
? Qwest Discloses Terms of MCI Bid
2/17/05
? Verizon, MCI Boards Approve Acquisition
2/14/05
TELECOM TANGLE
Track the shifts in the local, long-distance and wireless markets as major carriers consolidated over the years.
Qwest Communications' latest offer is $24.60 a share, identical in value to an offer rejected by MCI earlier this month, though it promises a quicker payout to shareholders and has downside protection on the stock portion of the bid from declines in Qwest's share price. Qwest says a tie-up with MCI will bring significant cost savings.
Qwest's rejected offer was $15.50 a share in Qwest stock, $7.50 in cash, and the continuation of MCI's annual dividend, which totals $1.60. That compares with Verizon's offer of $20.75 a share for MCI, which is the former WorldCom Inc. Verizon's $6.75 billion deal consists of roughly $4.8 billion in shares and roughly $1.9 billion in cash, which includes a dividend for MCI shareholders.
While the size of Qwest's offer stays the same, the timing for paying out the cash portion has been accelerated. In the revised offer, the company is proposing to pay as much as $6 a share by the time of shareholder approval, including any dividends paid by MCI. Qwest would also pay $3.10 at the deal's close. Previously, the company was proposing to pay $7.50 to shareholders at the close of the deal and $1.60 in dividends over four quarters.
In total, Qwest says its offer of nearly $8 billion -- which includes roughly $1 billion more in cash than Verizon's accepted $6.75 billion bid -- is "approximately 20% higher than the Verizon offer."
Verizon is the nation's largest local-phone company, with operations largely in the Northeast, and has a market capitalization of more than $98.3 billion. Qwest is the fourth-largest local-phone company, operating in Western and mountain states, and has a market capitalization of $7.63 billion.
In a letter to the chairman of MCI's board, Qwest Chief Executive Richard C. Notebaert complained that his company had been "denied access to MCI legal, financial and operational information that has been provided to other interested parties." He added that previous offers weren't met with "meaningful guidance or direction" from MCI. (Read the letter.)
"Consequently, with only press reports and lawsuits as sources of information for how the MCI board evaluated the components of our proposal, Qwest tenders this revised proposal, the terms of which are even more compelling for your stockholders," Mr. Notebaert said in the letter.
Following Qwest's move, Verizon issued a statement that said the company "has a signed agreement with MCI and a proven track record of completing transactions that create value for shareholders, customers and employees." If the Verizon deal falls through, MCI may be required to pay a $200 million breakup fee.
MCI's board will weigh Qwest's latest bid in coming days, and said it would "conduct a thorough review of the Qwest offer, as it has with all previous offers." The board of MCI, incorporated in Delaware, has a fiduciary duty to accept an offer that maximizes value for all shareholders.
The pressure on the board is high. There already have been at least four lawsuits filed by MCI shareholders, and several other major holders also have expressed unhappiness with MCI's agreement with Verizon. The battle over who will control MCI could become a test case for how boards behave in this frenzied merger-and-acquisition environment.
MCI's board members are expected to weigh the dollar value of the two acquisition offers, as well as the future value of any tie-up. The board also will have to choose how much to listen to hedge funds and arbitragers, who have increased their stakes in MCI in recent weeks and are pressuring the company's top managers and the board to seriously consider Qwest's offer, in an effort to make a quick profit.
"We want the highest price," says George Kellner , chief executive officer of Kellner DiLeo Cohen & Co., which specializes in arbitraging merger-and-acquisition situations. "But then, we are on our way as soon as the deal closes."
Legal experts say that it is clear that the board's responsibility is to evaluate the offers based on the best interests of MCI's shareholders -- not simply the higher nominal value of the offers. According to MCI's own corporate-governance guidelines, as published on the company's Web site, its board seeks to maximize long-term value for shareholders and employees alike. "If I accept an all-cash bid, then the duty is simply to accept the highest bid -- that is not the case here," said Morton Pierce, chairman of the mergers-and-acquisitions group at Dewey Ballantine LLP. "One is nominally higher, but it consists of a piece of paper. They have to evaluate what is the value of that piece of paper."
Some major MCI shareholders who prefer Qwest believe that the MCI board has acted properly -- but that the dynamics of the deal have changed since MCI accepted Verizon's offer. "There's nothing MCI's board did wrong heretofore," said Leon Cooperman, who runs hedge fund Omega Advisors Inc., one of MCI's biggest shareholders.
However, he says that several major developments have taken place since the announcement with Verizon: Perhaps most important, many big MCI shareholders have told the company they prefer the Qwest bid. "The people that own the business are saying they're willing to take risk under certain circumstances," Mr. Cooperman said. Plus, the federal government cleared Qwest to do federal business, a major consideration since the federal government is a huge MCI customer.
"For all these reasons, it's incumbent upon the MCI board to sit down with Qwest, and I believe they will," he said.
The recent decades of mergers-and-acquisition activity have led to several milestone legal decisions. In 1985, after the directors of Revlon rejected Ronald Perelman's bid to acquire the company, for instance, he prevailed in Delaware Supreme Court, which ruled that once it becomes clear the company is going to be sold for cash, the directors have to maximize shareholder value. "They better have a fancy piece of reasoning to justify taking the lower offer," said Daniel Posin, who teaches corporate law at Tulane University. "There will be a milestone case here if they don't take the best number out there."
He says the board is taking a risk by making assumptions about the future value of the Qwest stock that aren't already built into the stock today. "You have to assume the market is efficient and Qwest's weakness is already reflected in its stock." Plus, he says that Qwest's offer includes more cash than the Verizon offer. "Cash is king in this game," he said.
Qwest抛出新要约向Verizon叫板
Qwest Communications International Inc.在MCI收购大战中加大了赌注──向MCI提交了经过修改的要约，直接向MCI和Verizon上周签署的收购协议发起挑战。
现在MCI董事会面临的问题是：哪家的出价最好？MCI的董事们将不得不在两个买家中作出选择：是出价低很多但财力雄厚的Verizon呢；还是出价很高但负债也很高的Qwest？
Qwest的最新出价是每股24.60美元，与本月早些时候被MCI拒绝的出价是一样的。不过这次Qwest承诺将向股东提前支付收购费用，并为防范Qwest股价下跌风险而制定了保护性条款。Qwest表示，与MCI联手将使公司大大节约成本。
Qwest当初被拒绝的出价是以1股Qwest股票（作价15.50美元）加7.50美元现金，以及继续向MCI股票派发每股1.60美元的年度股息的条件换取1股MCI股票。而Verizon的方案是对MCI每股作价20.75美元，总收购额为67.5亿美元，其中约48亿美元以股票形式支付，余下19亿美元支付现金，包括给MCI股东的派息。
虽然Qwest的总出价没有变化，但它承诺的支付现金部分的时间大大提前了。该公司在新要约中表示，在股东批准合并计划时，包括MCI派息在内共支付每股6美元现金，并在交易完成时支付每股3.10美元。以前的方案是在交易完成时向股东支付每股7.50美元现金，随后在4个季度内支付每股1.60美元的派息。
Qwest说，它的出价总计接近80亿美元，比Verizon 67.5亿美元的出价高出20%左右，其中现金部分比Verizon高出约10亿美元。
Verizon是全美最大的本地电话公司，业务主要分布在美国东北部，公司的总市值达到983亿美元以上。Qwest是美国第四大本地电话公司，主要在西部和落基山脉地区经营，公司总市值为76.3亿美元。
Qwest首席执行长诺特巴特(Richard C. Notebaert)在给MCI董事长的信中抱怨说，Qwest一直得不到MCI法律事务、财务和经营方面的信息，而对其他有意收购的公司，MCI都提供这些信息。他还说，Qwest以前提出要约时没能得到来自MCI的有价值的指导和说明。
诺特巴特在这封信中说，结果Qwest只能从媒体报导和有关诉讼的消息中了解MCI对Qwest原来收购计划的评价，并称这份新报价中的条款对MCI的股东更有吸引力。
在Qwest提交了新的要约后，Verizon发表声明称，它与MCI签有协议，而且它以前有过成功完成并购交易的记录。这些交易为股东、客户和公司员工创造了新价值。如果MCI中途放弃与Verizon的交易，MCI或许要支付2亿美元的违约金。
这几天MCI董事会将权衡Qwest的最新报价，表示将“一如既往，全面考察Qwest的报价”。董事会有责任接受股东价值最大化的报价。
董事会的压力很大，因为MCI股东至少已提起了4宗诉讼，几个大股东也对MCI与Verizon达成收购协议表示不满。对MCI控股权的这场争夺，将成为董事会在当前火爆的并购环境下如何行事的试金石。
预计MCI的董事会成员将权衡比较两项收购报价的美元价值，以及收购后的长期价值。董事会还必须决定在多大程度上听取对冲基金和套利交易人士的意见。这些人近几周增持了MCI的股份，并对MCI公司最高管理层和董事会不断施压要求认真考虑Qwest的收购报价，以便他们的并购套利交易迅速获利。
Kellner DiLeo Cohen & Co.首席执行长凯尔纳(George Kellner)说，“我们想要的是最高价格。不过一旦交易结束，我们就会套利离场。”该公司专门针对并购计划进行套利交易。
法律专家称，显然董事会有责任基于MCI股东的最大利益对收购报价进行评估，而不仅仅是看哪个名义价值更高。根据MCI网站上发布的公司治理指南，董事会应致力于实现股东和员工的长期利益最大化。
“如果是全现金的报价，那么很简单就是接受最高报价。但现在的情况并非如此，”Dewey Ballantine LLP的并购集团董事长皮尔斯(Morton Pierce)表示，“一个名义价格虽然较高，但有股票部分，他们必须评估这部分的价值。”
一些倾向于Qwest的MCI大股东认为，MCI董事会行事得当，但接受Verizon报价之后形势的发展就变复杂了。“MCI董事会迄今并没有错，”经营对冲基金Advisors Inc.的古柏曼(Leon Cooperman)表示。Advisors是MCI最大的股东之一。
但他表示，自从宣布与Verizon签约的消息宣布以来，有了几大变化：或许最重要的是MCI的大股东们表示他们更倾向于Qwest的报价。此外，联邦政府取消率Qwest不得从事政府项目的禁令，而政府机构是MCI很重要的客户，所以这个变化需要好好考虑。
“由于这些原因，MCI董事会有责任坐下来同Qwest谈判，我相信他们会的，”他说。
在近几十年的并购活动中，曾出现过几项里程碑式的判例。例如，1985年在露华浓(Revlon)董事会拒绝佩瑞曼(Ronald Perelman)的收购报价后，佩瑞曼在特拉华州最高法庭打赢了官司；法庭裁定，如果一家公司显然要出售，董事们必须实现股东价值的最大化。
“如果接受较低的报价，他们最好有合理的解释，”在杜兰大学(Tulane University)讲授企业法的波森(Daniel Posin)表示，“如果他们没有接受最好的报价，就会再出现一起重要判例。”
他说，董事会在假定Qwest股票未来价值的时候肯定要冒风险，“你必须假定市场是有效率的，Qwest的业绩疲软早已体现在股价中。”此外，他说，Qwest报价中的现金额超出Verizon报价中的现金，“真金白银是并购市场之王”。
