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Mci Takeover Battle

In: Business and Management

Submitted By HarVad
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Team D & D

Team D & D

Background
Worldcom/ MCI is going through a restructuring effort after their bankruptcy filing and the surviving company is called MCI. Fresh round of shares are issued and previous debt has been settled.
Why MCI is a target? * Most extensive communications network in the world with a customer base in 200 countries * One of the most extensive Internet Protocol backbones and the largest carrier of international voice traffic * Least debt in phone industry ($6b) in the industry through restructuring process following bankruptcy * $5b cash in bank * Market trends indicated that the market will move towards broadband, therefore MCI was a prime target for acquisition. * MCI had reported losses of $4B on $21B sales in 2004 so the shareholder are nervous of the future of the company of its own
Potential Acquirers for the target company MCI are Qwest and Verizon. Table 1 provides the summary of all three companies. | Qwest | Verizon | MCI | Business Areas | Wireline, Wireless and Services | Telecom, wireless, services and international | Business Market- Medium and Large Businesses; GovernmentMass market: Residential and small businessInternational: Businesses outside the US | Geographic Coverage | America West and Northwest | 29 US States | Over 200 countries | Revenue | $13.8B with $13.2B from wireline segment | $71B: Telecom: $39BWireless: $28B | $27.3BBusiness Mkt: $14.1BMass Market: $6.4BInternational: $3.9B | Bond Rating | B+ | A+ | B |
Table 1: Company Summary
M&A Offers and Premium
In February 2005, Verizon and Qwest presented their final bids as described below
Verizon’s offer: $23.5 per share of MCI stock, $8.75 in cash and $14.75 in Verizon stock; This results in a valuation of $7.6B; Minimum stock exchange ratio will be 0.4062 shares of Verizon stock for each share of MCI....

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