Verizon raises bid for MCI and retains favor of board

Latest offer is $26 per share

A new month, a new bid for acquisition target MCI. This time around it's Verizon Communications that has won the approval of MCI's board of directors with a revised cash-and-stock offer of at least $26 per MCI share, the companies said Monday.

MCI's board sees Verizon's bid as superior to the $30 per MCI share offered by Qwest Communications International Inc. on April 21, and continues to recommend to shareholders that they accept Verizon's offer, it said. Qwest had given MCI until midnight Monday to accept its bid.

On March 29, Verizon bid cash and stock worth at least $23.10 per MCI share, an offer that MCI's board recommended to shareholders despite it being worth less than the standing bid from Qwest. After Qwest offered cash and stock worth $30 per share, MCI's board acknowledged that Qwest's offer was superior, but did not change its recommendation to shareholders.

Verizon's latest bid offers shareholders better long-term prospects, and also the possibility of a short-term boost from any rise in Verizon's stock price, according to MCI's board. Accepting Qwest's bid could damage MCI because many customers favor Verizon's bid, and a number of important customers have asked for the right to cancel their contracts if Qwest wins, the board said.

The latest bid consists of $5.60 per MCI share in cash, and either 0.5743 Verizon shares or shares worth $20.40, whichever is the greater. If the price protection element of the deal comes into effect, Verizon may, at its option, pay the difference in cash instead of issuing extra shares, Verizon said.

Qwest's best offer stands at $16 in cash and $14 in Qwest stock per MCI share, while Verizon's previous bid of $23.10 per MCI share consisted of $8.35 in cash and $14.75 of Verizon stock, according to MCI.

The deal remains subject to approval by regulators and MCI shareholders, and could take a year to close, the companies said.