Verizon Announces MCI Acquisition

By Yuki Noguchi, Ben White and Fred Barbash
Washington Post Staff Writers
Monday, February 14, 2005; 12:40 PM

 

Verizon Communications Inc. announced this morning that it has agreed to buy MCI Inc. in a deal it valued at $6.7 billion in cash, stock and dividends.

The merger comes amid a rush to consolidate in the telecommunications industry that has seen SBC Communications Inc. agreeing to acquire AT&T Corp. and Sprint Corp. agreeing to buy Nextel Communications, Inc.

The boards of Verizon and MCI have approved the acquisition, which requires shareholder as well as regulatory approval. The company, in a statement, said it expects approval to take about a year.

MCI Inc. board members accepted the offer last night after rejecting a sweetened and higher bid from Qwest Communications International Ltd., sources close to the negotiations said. Qwest, the rejected suitor, could attempt to challenge the Verizon-MCI deal.

Ashburn-based MCI, which was founded in Washington and traces its lineage to Microwave Communications of America Inc. in 1968, was known for pioneering competitive long-distance calling options in the 1980s.

The company also owns an Internet network that carries a large part of the world's online traffic.

Among the reasons that MCI accepted a lower bid, sources said, was that Verizon is considered a better strategic fit and a more financially stable company than Qwest, and thus offers better long-term value to MCI shareholders.

"It is a natural and logical extension of Verizon's strategy to transform our company to serve growth markets and offer broadband technologies," Verizon Chairman and CEO Ivan Seidenberg said in a written statement. The acquisition, he added, "accelerates Verizon's growth plan in the enterprise market, and it facilitates our becoming a major provider sooner and less expensively than if we had continued on a path of organic growth."

Company officials said the agreement would result in about 7,000 job cuts from the combined work force of about 250,000 employees, the Associated Press reported.

According to this morning's announcement, MCI shareholders will receive 0.4062 shares of Verizon stock for each share of MCI. Based on Verizon's closing price Friday of $20.75, Verizon put the take at $14.75 per share for MCI shareholders for a total value of $4.795 billion.