Qwest deciding whether to raise bid for U S West, after initial rejection

Weakened stock price may mean suitor must `stuff this offer with cash'

Telecommunications

June 23, 1999|By BLOOMBERG NEWS

DENVER -- Qwest Communications International Inc., which is battling Global Crossing Ltd. for U S West Inc., is under pressure to sweeten its $38.6 billion bid after the local phone company rejected the offer, analysts said yesterday.

U S West said it will stick with Global Crossing's $36.9 billion offer, citing concern over the 18 percent drop in Qwest's shares since the offer was unveiled June 13. Qwest, the No. 4 U.S. long-distance carrier, urged the company to enter negotiations. U S West said it will continue to watch Qwest's stock.

Even though U S West and long-distance provider Frontier Corp. have both rejected Qwest's unsolicited offers, Qwest chief executive Joseph Nacchio insists that his bids are superior to the companies' agreements with Global Crossing. Nacchio, who has yet to convince Qwest shareholders of his strategy, may have to add cash to increase the bids, or he even could make a hostile offer.

"The real focus has to be what Qwest is going to do to get the stock up," said Tom Burnett, president of Merger Insight, which tracks mergers and acquisitions. "They're going to have to stuff this offer with cash."

Before U S West's announcement late Monday, Qwest said it has no plans to increase its offers for Denver-based U S West and Rochester, N.Y.-based Frontier.

"If [Nacchio] walks away, he loses out on U S West customers, traffic and revenue," said Jeffrey Kagan, an independent telecom analyst based in Atlanta. "If he sweetens the bid, he risks more investor backlash."

Global Crossing's agreement values U S West at $36.9 billion, or $62.11 a share, compared with Qwest's offer of about $65.30 a share. Qwest originally offered as much as $61.2 billion for both U S West and No. 5 long-distance carrier Frontier.

Under the Global Crossing agreement, U S West can't start discussions with another suitor unless its board determines the bid is superior.

In a letter to U S West chief executive Solomon Trujillo yesterday, Nacchio said Qwest's bid is higher in value, provides more opportunity to slash costs and, unlike Global Crossing's offer, doesn't include a tracking stock.

Pub Date: 6/23/99

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