Qwest Makes New Run at MCI - TheStreet

Qwest

(Q)

vowed Thursday that it has only just begun to fight for

MCI

(MCIP)

.

Just two days after MCI accepted the latest bid from

Verizon

(VZ) - Get Report

, Qwest has increased its own offer for a third time.

Qwest now says it will pay $27.50 a share, valuing the deal for MCI at $8.9 billion. In a letter to the MCI board Thursday, Qwest chief Dick Notebaert says that's 20% better than the improved Verizon deal. Notebaert also says he was dismayed that MCI didn't seek a higher offer from Qwest before accepting Verizon's latest deal.

"We remain committed to a Qwest/MCI transaction as we believe it will deliver superior value to shareholders as well as significant benefits to customers, employees and other stakeholders," Notebaert wrote in the letter.

"MCI's Board of Directors will review the revised proposal and respond accordingly," MCI said in a postclose release.

In addition to the higher per-share price, Qwest raised the fixed price, or collar, on the stock portion of the bid to $14 a share. The company also promised to raise $2 billion in cash to replace the same amount of stock if the offer is accepted. This cash "backstop" offer addresses one of MCI's primary concerns, that Qwest's shares could fall to $2 or below.

The Denver telco's previous stock-and-cash proposal was worth $26.50 a share, or $8.5 billion. On Tuesday, MCI accepted Verizon's sweetened $23.50-a-share offer. That stock-and-cash proposal, valued at around $7.6 billion, was still lower than Qwest's previous bid.

Qwest's latest terms also match Verizon's so-called collar, which protects MCI shareholders from a drop in the value of the acquirer's shares. Qwest's new offer now protects MCI holders if Qwest's shares drop to $3.32. The company's previous offer didn't protect MCI holders from a drop in Qwest shares below $3.75.

This offer expires April 5, says Qwest.

Qwest showed signs of its tenacity earlier this week, when CFO Oren Shaffer

told investors at a conference breakout session that "now we'll see where the battle lines are drawn."

For its part, Verizon's latest offer included $8.35 a share in cash and $14.75 a share in stock for MCI, plus 40 cents in already paid dividends.

Verizon had previously bid $20.75 a share, or about $6.7 billion, for Ashburn, Va.-based MCI.

And though Qwest has clearly appeared desperate to get this deal, observers say Verizon is very much in a

similar position, needing MCI's coveted business and government customers to help offset the slide in core local phone sales.

Qwest shares fell a dime to $3.67 Thursday, while MCI jumped 49 cents to $24.94. Verizon was up a nickel at $35.48.