MCI Still Going WIth Verizon Over Qwest

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MCI’s board of directors has accepted an amended offer from Verizon to acquire the company.

Under the amended agreement, Verizon will acquire MCI for $23.10 per MCI common share, not including the 40 cents per share cash dividend recently paid by MCI to its shareholders. MCI’s shareholders will receive $23.50 per share including the recent 40 cent dividend, or approximately $7.6 billion in aggregate.

According to a Computer Business Review Online article,

“MCI’s board was concerned about Qwest’s $17bn debt pile, its balance sheet, and the fact that its shares were less attractive than those of New York-based Verizon. Indeed, at the end of 2004, Qwest had nearly $16.69bn of long-term debts and just $1.77bn in cash and liquid assets. The carrier lost $1.79bn for the year as revenues fell 3.4% to $13.81bn.

By contrast Verizon ended 2004 with long-term debts of $37.67bn and just $4.55bn of liquidity, but its business generated $71.28bn of revenue, net income of $7.83bn, and $21.82bn of cash.”

Under the amended terms, Verizon may elect to require MCI to put the proposed transaction with Verizon to a vote of the MCI shareholders. MCI has agreed that the “break-up fee” to be paid by MCI to Verizon under certain circumstances will be $240 million, and it has also agreed to reimburse Verizon for up to $10 million in expenses in certain circumstances.

Ivan Seidenberg, Verizon’s chairman and CEO, said, “Verizon and MCI together create a formidable and highly competitive company delivering a full range of mission-critical voice and data products to businesses and government. We believe our agreement with MCI represents superior value and is a compelling proposition for MCI’s shareholders, customers, employees and creditors.”

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MCI Still Going WIth Verizon Over Qwest
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