The Financial Times:
Monday June 14 1999
Qwest bids underline consolidation
By William Lewis in New York
Qwest Communications, a fast-growing Denver-based telecoms group, yesterday unleashed two unsolicited offers worth a total of $55bn (£34bn) for US West and Frontier, two telecoms companies that have both recently agreed to merge with Global Crossing.
If the two deals are successfully completed, the combined company would have a market capitalisation of $87bn and be headquartered in Denver.
Together the bids represent the largest ever unsolicited takeover offer, providing further evidence of rapid consolidation in the US telecoms industry. Qwest will also assume $11.4bn of debt, making the headline value of the two separate bids $66.4bn.
Joseph Nacchio, Quest's chairman and chief executive, said the proposed deals would enable the Denver-based group to bring internet services and broadband to more than 31m consumers and businesses in the US. "The internet communications powerhouse we intend to create will bring together the three companies' network infrastructure, applications and services, as well as their customer distribution channels," he said.
Global Crossing, Frontier and US West could not be reached for comment last night. However, one person close to Global Crossing said: "If they get these off us, there will be hardly anything left of Global Crossing."
There has been intense speculation about Qwest mounting an offer for US West, with investors puzzling how Qwest would financially structure a deal. Qwest has designed both offers so US West shareholders will receive more if Frontier agrees to a Qwest takeover, and vice versa.
Based on the closing price of Qwest's stock on Friday, Qwest is offering $80 for each US West share if Frontier agrees to be taken over by Qwest. If Frontier does not agree to be taken over by Qwest, US West will offer $78 for each US West share. This means Qwest is offering to pay between $40.2bn and $41.3bn for US West, and will also assume $10bn of debt.
Qwest said that assuming Frontier agrees to a takeover, Quest's offer for US West represents a 45.8 per cent premium to US West's closing share price on Friday, and a 28.5 per cent premium to US West's stock price close on May 14, the last trading day before it announced the merger with Global Crossing.
For Frontier, Qwest is offering a combination of stock and cash. Based on Qwest's stock price on Friday, it values each Frontier share at $75, if US West also agrees to a merger with Qwest, and $73 a share if US West does not agree. This values Frontier at between $13.2bn and $13.6bn, and Qwest will assume debt of $1.4bn.
Based on Qwest's closing stock price on Friday, its offer for Frontier represents a 35.3 per cent premium to Frontier's closing price on Friday. It is also 68.1 per cent above Frontier's close on March 16, the day before it announced a merger with Global Crossing.
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