WSJ.com - Qwest Sets Its Sights Anew on MCI: "Qwest Communications International Inc., stepping up efforts to overturn Verizon Communications Inc.'s agreement to acquire MCI Inc. for $6.75 billion, is expected to launch a revised offer for MCI this week, people familiar with the situation say.
Qwest has complained that its earlier approaches to MCI, an informal offer and a formal bid, weren't treated properly by MCI, which rejected the Qwest offers and instead agreed to Verizon's, though it was valued at 19% less than Qwest's most recent bid."
From last week's BusinessWeek:
"How do you make a $6.7 billion deal look like a $5.3 billion bargain? The investment bankers working on Verizon Communications Inc.'s VZ ) purchase of MCI Inc. (MCIP ) apparently think they've found a way. And if they pull it off, they'll likely encourage a string of copycats -- all of whom will owe a note of thanks to President George W. Bush for pushing through the 2003 tax cut on dividend income.
To understand why, start on Feb. 14, when Verizon and MCI execs announced their deal. While MCI shareholders would get $6.7 billion if they agree to the sale, Verizon said the purchase would cost its shareholders only $5.3 billion. To make up the difference, MCI agreed to pay its shareholders the extra $1.4 billion, or $4.50 a share, in dividends. The money would come out of MCI's own cash before Verizon ponies up its $5.3 billion and actually takes over. Adding to the fog over the true value of the deal: a second slug of cash, $488 million, would be part of Verizon's payment; moreover, MCI shareholders were already scheduled to receive 40 cents of that suddenly plumper dividend. "We are offering...a total package of about $6.7 billion. But it is $4.8 billion of Verizon equity, and the rest of it is in a variety of cash distributions that come from MCI's cash hoard," said Verizon Chairman and CEO Ivan G. Seidenberg in a conference call held with MCI Chief Executive Michael D. Capellas on the morning of the deal.
When deals are structured to save taxes, sellers won't demand as much money from buyers for their companies. If, in turn, buyers find they can do deals by paying less, they'll likely do more deals. How many more is speculation. But even one is probably one more than Congress or the President imagined when they changed the tax law."