Morning report on deal...(Offered at 37 1/2)
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Qwest Communications International Inc. (QWST) 44 7/8 closed: Merger and acquisition mania in the telecommunications area continues. It does not matter that outstanding offers already exist. In the race for market dominance, even upstart companies are making a bid to become major market players. Yesterday, this multimedia communications services provider made a hostile offer to acquire US West (USW 54 7/8) and Frontier Corp. (FRO 55 7/16) in a combined deal worth $55 billion in cash and stock and $11.4 billion in assumed debt. An outstanding bid of more than $42 billion in stock already exists for these two companies from another upstart Global Crossings Ltd. (GBLX 50 3/4). Unlike the latest merger and acquisition bid, the offer from GBLX is friendly. However, QWST CEO Joseph Nacchio is confident that his hostile bids for these two telecommunication companies will be successful because, first his offer is significantly richer than the bid made by Global Crossings, and second, Mr. Nacchio feels that his company is further along in its strategy of building a national fiber-optic network. In addition, QWST has a provision to acquire either company should one decide to balk, most likely US West. However, unlike the GBLX offer, the latest bid from QWST does not have a collar, meaning should the market not react favorably to the latest overture, the premium that QWST is willing to pay for the two companies would shrink or go away completely. Regardless, Qwest's offer sets up the potential for a bidding war as both telecommunication newcomers try to out-muscle each other to gain further penetration in this profitable and evolving telecom business. According to the terms of the agreement, Qwest's offer is worth $80 per share to U S WEST shareholders if Frontier agrees to a business combination with Qwest and $78.00 per share if Frontier and Qwest do not agree to a business combination. On the other front, Qwest will pay $20.00 in cash and 1.181 shares of Qwest stock for each share of Frontier if not deal with US West is successful, but the stock portion to Frontier shareholders would be increased to 1.226 shares if Qwest is successful in obtaining US West as well. But the lack of a collar could make or break this latest offer. As should be expected, market participants will have a say on which offer makes more sense and so far, QWST are heading lower in pre-market trading. |
