Verizon Communications agreed to purchase MCI Inc. in a stock-and-cash deal valued at about $6.75 billion, trumping an earlier bid for the long-distance carrier from Qwest Communications International Inc.
The Verizon deal would be the third-largest telecommunications-company merger in two months. In January, SBC Communications Inc. agreed to purchase AT&T Corp. in a $16 billion deal, and Sprint Corp. agreed to purchase wireless carrier Nextel Communications Corp. for $35 billion in December.
According to a press release, MCI shareholders will receive 0.4062 Verizon shares for each MCI share they own (valued at about $4.8 billion) and $488 million in cash. Verizon will also pay a special dividend to MCI shareholders of $4.50 per share ($1.463 billion), and the company will assume $4 billion in MCI debt.
The deal values MCI at about $20.75 per share, on par with its Feb. 11 closing price.
MCI shares were down 82 cents each to $19.93 Monday. Verizon shares were down 12 cents to $36.19 per share.
The deal would give Verizon access to the country’s second-largest long-distance telephone-service provider and, perhaps more important, access to large business and government customers.
Verizon will also inherit at least one deal with a cable MSO from MCI. In December 2003, Time Warner Cable struck a deal with MCI and Sprint Corp. to provide the backbone for its voice-over-Internet-protocol network.
Verizon spokesman John Bonomo said those agreements are operational issues that will be addressed as the two companies move closer to approval.
“To say at this point, when [the merger agreement] is really hours old, what happens with those is probably too early to say,” he added.
In a press release, MCI and Verizon said the merger must be approved by MCI shareholders and government regulators. That approval process is expected to take about one year.