MCI’s shareholders will vote on Thursday on whether to accept Verizon Communications’ controversial $7.4bn takeover bid in the face of continuing opposition from some large shareholders investors who believe the company should have accepted a higher $9.85bn offer from Qwest Communications.
MCI’s board of directors accepted the lower offer from Verizon this year because they believed a merger with the biggest US telecommunications group would provide better long-term benefits than a link-up with rival Qwest, which is saddled with a heavy debts.burden
The bid battle for MCI between Verizon and Qwest for control of MCI erupted after SBC Communications announced a deal to acquire MCI’s arch-rival AT&T as part of a wave of industry consolidation driven by technology change and other factors.
Some of MCI’s shareholders, including hedge fund Deephaven Capital Management, continue to oppose the transaction. Deephaven, which owns about 11.8m shares, or 3.6 per cent, of MCI and $199m in MCI debt, has said it would solicit proxy votes in opposition to the merger.
DE Shaw, an investment firm with about 10.1m shares, has also come out against the merger. Both firms argue that the merger undervalues MCI and is inadequate given the offers MCI had previously received and rejected.
In advance of the vote, Proxy Governance, an independent proxy advisory and voting firm, has come out in favour of Verizon’s bid, equivalent to about $26 a share. “The transaction is the best, and currently only, deal on the table for MCI, a company that, considering its eroding financial performance and market opportunity, had little choice but to take advantage of the ongoing consolidation in the industry,” Proxy said.
Meanwhile, MCI said it had reached an an agreement with a group of 15 states and the District of Columbia to pay a total of $315m in order to resolve state claims for additional taxes related to a previously used royalty programme.
Separately, MCI agreed to pay North Carolina $16m in additional taxes. MCI admitted no wrongdoing.
