] "There can be no reason for the board to support an offer
] to MCI owners that is substantially inferior to what
] Verizon has just agreed to pay for a non-control block of
] stock," Miller said in the letter, which was made public
] late Saturday. "Shareholders would be outraged if the
] Board did less than insist that the identical terms be
] made available to all other owners. That, of course,
] implies a higher value than the $25.72 cash price Mr.
] Slim will receive, since he will have the use of that
] cash shortly, while other MCI owners would have to wait
] until closing if Verizon offered the same price,
] including the same effective call option on Verizon's
] stock. Our rough calculation of the present value of what
] Verizon agreed to pay Mr. Slim, including the call, is in
] excess of $27.00."

How crazy this all is.

Brief recap:
* Qwest makes generous offer to buy MCI. MCI says No.
* Verizon makes low offer to buy MCI. MCI says Yes.
* Shareholders say Qwest. MCI says No. Shareholders say "lawsuit".
* Verizon makes a slightly better offer ($23.10/share). MCI says Yes.
* Qwest makes more generous offer ($27.50/share). MCI says No. Shareholders say WTF
* Verizon makes deal to buy 13% stake from prominent billionare investor (make the takeover easier). Offers $25.72 plus an option. MCI says... nothing. Shareholders say WTF.

Why is this significant? This is MCI executives probably behaving badly. MCI, the company known as Worldcom. What a shock. Here are the forces in motion: MCI shareholders, post bankruptcy, are value players who saw a buyout as inevitable and lucrative. They are looking for the best price. Qwest wants to buy MCI for its customer list -- and needs to have it to survive, so it will pay whatever it takes. Verizon sees big market assets cheap. MCI execs see themselves without jobs if Qwest buys, and sweet offers of something from Verizon. So, 20% premium be damned.

I think it was in really bad taste for Verizon to make this side offer. They want a voting block (13% is as big as they can get before the poison pills) to help the merger. But they can't sweet talk an investor out of an equity position -- not someone who lost in the debt-equity conversion post-scandal. So they had to make a reasonably attractive offer. Not like the one for the rest of the company.

It will be fun to watch the justifications for why they have a higher price for a non-majority share than the company. Or how the MCI people continue to say it is the best deal they could get for the company, despite the obvious evidence that they are selling it cheaper than the buyer is willing to pay. Gross.

Verizon's Slim Deal