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Thursday April 07, 08:12
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Qwest faces tough challenge in fight for MCI
(by Helen Snow)
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Wednesday morning the MCI board one more time announced its refusal of Qwest’s cash and stock offer ($8.9 billion), referring to Qwest’s financial troubles and reluctance to offer a higher price. Instead, the board voted to stick with a bid from New York-based Verizon ($7.6 billion).
At the moment, the decision will be passed over to MCI investors that means starting of a severe lobbying fight to win their support. "Qwest will allow shareholders to dictate next steps," the Denver company said in a statement on Apr. 6.
Verizon and Qwest, two closest rivals in the telephone industry, have been fighting for nearly two months over MCI which serves a list of prominent government and corporate clients. Qwest’s financial troubles, including a $17 billion debt load, and the long-term value of the Qwest shares forced MCI’s board to accept lower bids from Verizon rather than to merge with Qwest.
Despite the fact that Qwest still have chances to win as some MCI shareholders are backing Qwest, but do not form a majority yet (26% of MCI’s shares) , it faces a complicated challenge. Verizon has strong support from a large number of MCI board members. What’s more, MCI’s corporate-governance rules could be a serious obstacle for Qwest in a proxy fight.
Stock reflects properly all recent developments. Qwest’s shares fell 2 %, or 8 cents, to $3.78 yesterday. Verizon’s stock got 14 cents, closing at $35.51, and gained 24 cents more in after-hours trading, while MCI’s shares were 38 cents up, to $25.39, before gaining another 61 cents in after hours.
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