“The MCI Takeover Battle: Verizon versus Qwest” I. STRATEGIC PROFILE This case profiles MCI’s merger debate between Verizon and Qwest in 2005. At this time‚ many other companies are merging due to the industry consolidation‚ therefore forcing MCI to keep up with its competition. MCI was acquired after a bidding war between WorldCom‚ British Telecom and GTE‚ with the winning bid being a $37 billion offer from WorldCom. MCI-WorldCom then acquired many other communication companies excluding Sprint
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MCI Takeover Battle: Case analysis questions 1. What are the strengths and weaknesses of Verizon‚ MCI‚ and Qwest? Where are the synergies in the proposed combination? 2. Evaluate the two offers in Exhibit 7. What explains the two structures? In each case‚ what is the value to MCI shareholders? 3. Merger arbitrage (or risk arbitrage) funds speculate on the completion of stock and cash mergers‚ typically buying the target and hedging the risk of the acquirer’s shares accordingly to exchange ratio
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Verizon and MCI: A Merger that Promotes Competition August 2005 POLICY STUDY No. 05-1 by Richard E. Wagner Harris Professor of Economics George Mason University; Fairfax‚ VA and Senior Fellow‚ Public Interest Institute Mt. Pleasant‚ IA POLICY STUDY August 2005 No. 05-1 Public Interest Institute Dr. Don Racheter‚ President Verizon and MCI: A Merger that Promotes Competition POLICY STUDIES are published as needed. They are longer‚ analytical articles on important
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The MCI Takeover Battle Verizon versus Qwest 1. What are the strengths and weaknesses of Verizon‚ MCI‚ and Qwest? Where are the synergies in the proposed combination? 2. Evaluate the two offers in Exhibit 7. What explains the two structures? In each case what is the value to MCI shareholders? 3. Merger arbitrage (or risk arbitrage) finds speculate on the completion of stock and cash mergers‚ typically buying the target and hedging the risk of the acquirer’s shares according to the exchange
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MCI Takeover Battle: Case analysis questions 1. What are the strengths and weaknesses of Verizon‚ MCI‚ and Qwest? Where are the synergies in the proposed combination? 2. Evaluate the two offers in Exhibit 7. What explains the two structures? In each case‚ what is the value to MCI shareholders? 3. Merger arbitrage (or risk arbitrage) funds speculate on the completion of stock and cash mergers‚ typically buying the target and hedging the risk of the acquirer’s shares accordingly to exchange ratio
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Homework #5 1) MCI initially financed its needs through equity issuance. This was done because MCI’s source of revenue was insecure in its infancy‚ and this allowed them to raise capital without being tied down by excessive debt repayments further down the road. To continue raising capital after MCI began posting early profits (particularly to repay short-term bank debt)‚ the company issued convertible preferred stock. This preferred stock was able to attract capital due to its dividend paying
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1. What message is MCI trying to send to financial markets? From 1993 until the start of 1995‚ MCI’s stock had outperformed the S&P. However‚ in 1995‚ the stock’s performance was poorer than the S&P. With shareholder’s getting restless‚ the idea of a stock repurchase was being considered. Depending on which option MCI chooses—stock repurchase with debt issuance or open market repurchase program—the message being sent could be different. Let’s consider option one—MCI issues debt and uses the
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Question 1 MCI is going to need significant cash in order to undertake the capital investment plans that will allow it to achieve the 20% market share that it desires. The projections call for capital expenditures ranging from $890 mln in 1984 to $2.76 bln in 1987. With an existing cash position of $542 mln‚ MCI can cover its capital expenditures requirements for only a year (1984). Thereafter‚ the financing needs range from $732 mln in 1985 to $1.43 bln in 1987‚ assuming that access charges do
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QUESTIONS MCI Communications Corporation (1983) 1-What is the likely level of MCI’s external needs over the next several years? By how much could they be expected to vary? Why? 2-Critique MCI’s past financial strtategy‚ giving attention to the types of securities on which it has relied. Why did MCI finance itself in the manner it did? 3-Based upon your analysis of the outlook for MCI and the competitive and regulatory evolution of the industry‚ recommend a capital structure policy for MCI and
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MCI case ’Convertible Bond’: a bond that can be converted into a predetermined amount of the company’s equity at certain times during its life‚ usually at the discretion of the bondholder. “conversion ratio’’: the number of shares that the investor receives if he or she exercises the conversion MCI provided long distance telecommunications service in competition with AT&T. Timeline: 1971: FCC allowed new companies to enter the market for specialised long distance services‚ which consisted chiefly
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