Qwest Revises Bid in Takeover Fight
The takeover battle for US West Inc. and Frontier Corp. heated up Wednesday as Qwest Communications International Inc. revised its $46.5-billion unsolicited bids for the telephone companies.
US West, a Denver-based Baby Bell, and Frontier, the nation’s No. 5 long-distance carrier, both rebuffed Qwest’s original offer in favor of a merger proposal from Global Crossing Ltd.
Both companies acknowledged that they had received the new proposals and were reviewing them. They declined to comment further.
Global Crossing and Qwest, the nation’s fourth-largest long-distance company, are racing to build fiber-optic cable networks that span the globe. They want to provide high-speed audio, video and data communications via the Internet, and they want to sell their services to the 27 million customers of US West and Rochester, N.Y.-based Frontier.
“We have modified our offers to respond to the concerns Frontier and US West expressed . . . that they be given downside protection” from volatility in Qwest’s stock price, said Qwest Chief Executive Joseph P. Nacchio.
Denver-based Qwest is now offering to pay $69 a share in stock for US West and $68 a share in cash and stock for Frontier. Those prices will be locked in place as long as Qwest’s shares trade between $43.50 and $30.40. Qwest’s shares nose-dived as much as 24% last week, eroding the value of the company’s initial $55-billion takeover offer.
The new bid did little to assuage Qwest investors, who sent the company’s stock down $2.75 to close at $32.56 on Nasdaq.
The new offer is about 12% more than Global Crossing’s $41.7-billion offer, which also is structured to protect the value against moderate swings in its stock price.
Global Crossing CEO Robert Annunziata said in a statement, “We remain committed to our definitive merger agreements and have no plans to take any action at this time.”
Under its revised offer, Qwest would pay $20 in cash and $48 in stock (about 1.36 shares) for each share of Frontier. It would pay US West shareholders $69 worth of its stock (about 1.95 shares) for each share of US West they hold.
At Qwest’s current stock price, the new offer is actually lower than its original bid, in which Frontier would have received $20 in cash and $55 in stock (then 1.18 shares), and US West would have received $80 in stock (then 1.74 shares).
Bermuda-based Global Crossing is offering $63 a share in cash and stock for Frontier and about $61.14 a share in stock for US West.
On Wednesday, US West’s shares rose $1 to close at $58 on the New York Stock Exchange, where Frontier jumped $1.88 to close at $59.88. Global Crossing fell $1.56 to close at $45.88 on Nasdaq.
