NEW YORK - Verizon is widely expected to boost its bid for MCI again now that the longdistance phone company has embraced a rival $9.75 billion bid from Qwest, though it remains unlikely Verizon will need to pay that much to win MCI back.
Analysts say MCI’s board had little choice but to declare Qwest’s latest offer superior by Saturday’s deadline, given its dubious legal grounds for sticking with a Verizon deal worth just $7.5 billion.
But that means, to Qwest’s dismay at being treated as a second-rate suitor, that its "best and final" offer will amount to just another bargaining chip for MCI’s board — unless Verizon unexpectedly surrenders after a three-month bidding war.
Starting today, Verizon has five days to respond with an improved offer for MCI or walk away with a $240 million breakup fee. It also has the right to ignore that deadline and force MCI investors to vote on its existing deal, hopeful that enough fear Qwest’s shaky finances and strategic outlook.
MCI’s board has repeatedly expressed concern about Qwest’s $17 billion debt load and the long-term value of the Qwest shares MCI investors would receive as partial payment. The MCI board also has questioned whether Qwest can meet its forecast of nearly $3 billion a year in cost savings from the proposed merger.
MCI’s board has twice accepted lower-priced deals with Verizon, so Verizon could prevail again. The board can’t officially swing its recommendation from Verizon to Qwest until the five days elapse.
Regardless of who wins, analysts are questioning whether the bidders are at risk of overpaying for MCI’s business. Qwest’s $30 offer values MCI about 50 percent higher than when the bidding began.