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MCI Back in Verizon's Arms

The long-distance company will recommend a $26-a-share takeover bid from the telco.
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MCI

(MCIP)

is back in

Verizon's

(VZ) - Get Report

arms again Monday after the New York telco raised its takeover offer for the former WorldCom to $26 a share in cash and stock.

Verizon, which faced a weekend deadline to respond to a competing offer from

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Qwest

(Q)

, said its latest bid consists of $5.60 a share in cash plus 0.5743 share of stock, with a collar that will keep the value of the shares from falling below $20.40.

In a separate announcement, MCI said its board unanimously determined the new offer is superior to Qwest's $30-a-share bid and said it would recommend to shareholders that it be accepted. MCI directors reiterated arguments in favor of the Verizon offer, including the relative stability of its shares, the competitive profile of a combined Verizon/MCI, and Qwest's large debt load.

"In addition, MCI's board noted that a large number of MCI's most important business customers had indicated that they prefer a transaction between MCI and Verizon rather than a transaction between MCI and Qwest," MCI said.

"As their contracts come up for renewal, a number of customers have also requested rights to terminate their arrangements with MCI in the event of a Qwest transaction. These customer concerns, in the board's view, pose risks in connection with a Qwest transaction that could negatively impact the value of the equity stake in a combined Qwest/MCI to be received by MCI's shareholders under Qwest's offer."

Monday's statement ends a 10-day flirtation with Qwest, which has spent the past two months trying to convince MCI's board that its takeover offers were a better bet for the long-distance company's shareholders. MCI finally agreed on April 23 to recommend Qwest's $30-a-share offer after turning down several previous bids.