View From a HeightCommentary From the Mile High City
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View From a HeightCommentary From the Mile High City
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February 18, 2005"...What is Your Qwest?""What is your name?" After listening to Qwest's conference call, let's just say that Notebaert didn't sound too happy. When a guy starts talking about "keeping options open," and "seeing how the deal plays out," it's pretty clear there's no Plan B. They're going straight to Plan 9. I've written about this non-deal before, here, here and here, so there's little point in repeating the details. What's astonishing is that Qwest isn't giving up. Qwest's letter to MCI is somewhere between the sad and pathetic (click below to Read the Whole Thing). It sounds as though Qwest is being manipulated by a couple of large MCI shareholders who want a higher premium from Verizon. Some of them were arguing that MCI had a fine cash stream, when in fact it does not, and Leon Cooperman has been out there pushing MCI hard. In fact, Notebaert really has very little left to bid with. Any more cash is essentially coming from MCI's own account, and defeating the purpose of the merger - cash for Qwest. Any more stock, and it becomes unclear just who's buying whom. So what's he going to offer? Mountain view property in Elbert County? The only card Notebaert has to play is the MCI board's fiduciary responsibility to the shareholders, so that's the case he's trying to build. If the shareholders see through it, there's always a slight chance that the SEC, FTC, or Czar Spitzer might think otherwise. It remains to be seen how far Qwest is willing to push this, but if they want to spend time negotiating deals, they have some bondholders who are probably folding their arms and tapping their feet impatiently right about now. On second thought, maybe it's more like the Black Knight. February 17, 2005 The Board of Directors Dear Mr. Katzenbach: I am writing this letter to request information from you regarding Qwest's proposal to acquire MCI. On February 11, Qwest submitted a written proposal to acquire MCI. On February 13, Qwest reconfirmed the terms of our proposal in writing to MCI's Board. We are aware that MCI has signed an agreement to be acquired by Verizon Communications Inc. As of the writing of this letter, we have just received a copy of this agreement and we are in the process of evaluating it. Published reports, including public disclosures by MCI's President and CEO, indicate that the consideration to MCI shareholders in the Verizon proposal is substantially less than the consideration Qwest offered to MCI shareholders. In addition to the superior merger consideration offered by Qwest to your shareholders compared to the Verizon offer, we would like to remind you that Qwest's proposal is superior to the Verizon proposal because our regulatory approval process is likely to be completed at least six months more quickly and the value to the MCI shareholders from participation in approximately 40% of the synergies in a Qwest transaction will substantially exceed the value of synergies that would be received by MCI Shareholders in a Verizon deal. To date, we have not received any response from MCI or its advisors on the terms of our February 11 proposal, as reconfirmed on February 13. If we had received this response, we may have been already able to communicate to you a modified offer that would be beneficial to MCI shareholders. In addition, we were provided limited access to due diligence information regarding MCI, which we have been informed was substantially less than the access provided to other parties. In addition, we would like to advise you that once we have completed our review of the Verizon merger agreement, we do intend to submit a modified offer to acquire MCI and we would expect MCI and its advisors to engage us in a meaningful dialog regarding the merits of our offer and we would further expect access to due diligence information consistent with that offered other parties. Sincerely yours, Richard C. Notebaert |
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