US long-distance telephone company MCI rejected a $9.1 billion takeover offer from Qwest Communications International, leaving the spurned suitor to gauge shareholder reaction as it weighs its next move in the two-month takeover battle.
The rejection, confirmed by Qwest today, marked the third time MCI has chosen a lower acquisition offer from Verizon Communications, which last week sweetened its bid to $7.6 billion.
The wrangling over MCI is driven by the suitors' interest in gaining a presence in the market for providing telephone and data services to large corporations.
Qwest is also eyeing MCI's cash flow as a way to reduce its own $17 billion debt load. The next move could be a hostile bid from Qwest, which could bypass MCI's management and bring its offer directly to shareholders.
Some large MCI shareholders have balked at the lower price offered by Verizon, and urged MCI to negotiate a more lucrative deal with Qwest.
The talks came to a head yesterday as MCI asked Qwest to hike its bid as high as $9.9 billion, or $30 a share, up from its current bid of $9.1 billion, or $27.90 a share, a source familiar with the situation said.
Verizon's deal is valued at $23.50 a share. Denver-based Qwest refused to raise its offer and reaffirmed its deadline of midnight, saying it would withdraw its $9.1 billion offer if MCI failed to deem it superior to Verizon's deal. Although Verizon has already sweetened its offer once, it had warned it would walk away instead of countering again if MCI picked Qwest's bid.
"We are pleased to see the process move to the next step, where we can begin the proxy phase of this transaction," Verizon said in a statement. "We are looking forward to working with MCI's shareholders to get the deal done properly."
Qwest reiterated that its offer would provide a higher financial payout, faster regulatory approval and greater synergies than the rival deal with Verizon. Despite Qwest's higher price, MCI has repeatedly rebuffed its bids, citing Verizon's secure financial health and strong growth prospects as reasons for selecting it as a buyer.
Verizon is the largest US telecommunications company.