Deephaven Capital Management, one of MCI's largest shareholders, has launched a proxy battle in an attempt to block Verizon Communications' proposed $8.44bn acquisition of the US telecommunications group.
Deephaven, a fund manager with a 4.96 per cent stake in MCI, signalled its intention to vote against the deal and solicit other shareholders to do the same in a filing with the US Securities and Exchange Commission.
The move represents the latest challenge to the proposed transaction and appears aimed at persuading Qwest Communications to re-enter the bidding for MCI.
MCI's board decided Verizon's offer of $26 a share, which values MCI at $8.44bn, was better than Qwest's bid of $9.75bn, or $30 a share. Qwest's retreat ended 11 weeks of fighting over MCI.
Despite winning the backing of a group of Verizon's biggest shareholders, including Legg Mason's Bill Miller, Qwest withdrew its bid for MCI, the second largest US long-distance carrier, in May after a three month battle to win MCI board approval for its rival bid.
Since then, Qwest, which forced Verizon to raise its bid for MCI by 28 per cent during the takeover battle, has repeatedly indicated it is not interested in renewing its bid.
In a letter to MCI's shareholders detailed in the SEC filing on Wednesday, Deephaven said it believed “that the proposed merger between Verizon and MCI is not in the best interests of MCI stockholders”, and that its opposition to the merger between MCI and Verizon, “is based on Deephaven's commitment to stockholder value” and that the price being offered is too low.
“To that end,” said Deephaven, a unit of the Knight Trading Group, “we are soliciting your proxy to vote against the proposed merger with Verizon”.
In the filing, Deephaven said it did not know if Qwest would resume its attempt to buy MCI should Verizon's proposal be rejected by shareholders. It also said no date had been set by MCI for a meeting to vote on Verizon's offer, but that it would use the proxies it receives whenever that meeting is held.
MCI has yet to set a date for the shareholder vote on the merger. Verizon has indicated that it expects the vote to take place next month.