Qwest sweetens offer for U S West, Frontier

$41.5 billion bid raised to $54.3 billion in effort to beat rival

June 24, 1999|By BLOOMBERG NEWS

DENVER -- Qwest Communications International Inc., the No. 4 U.S. long-distance phone company, sweetened its offers to buy U S West Inc. and Frontier Corp. yesterday to $54.3 billion from about $41.5 billion, increasing the odds the companies will break their agreements with Global Crossing Ltd.

"This dramatically increases the likelihood that Qwest prevails," said Daniel Zito, an analyst at Legg Mason Wood Walker Inc.

Qwest said it would pay $69 a share in stock for U S West, which provides local phone services in 14 Western states, and $68 a share in cash and stock for Frontier, the No. 5 long-distance carrier.

The offers are guaranteed if Qwest trades between $30.50 and $43.50 a share. Qwest is offering to pay 8 percent more for Frontier and 13 percent more for U S West than Global Crossing.

Qwest Chief Executive Officer Joseph Nacchio was forced to raise the bids after Qwest shares plunged almost 25 percent and U S West and Frontier rejected the previous offers.

Nacchio has the backing of Chairman Philip Anschutz, who owns a 40 percent stake in Qwest and who voted with the board to increase the offer. Another proponent of the move is BellSouth Corp., which owns 10 percent of Qwest. Other shareholders are not particularly happy.

"It was a high-growth, high-value stock, and now they will take on a company that will cut that growth in half," said Brian Hayward, a portfolio manager at Invesco Funds Group. "That's going to change which investors will own this stock." U S West shares rose $1 yesterday to $58, while Frontier gained $1.88 to $59.88. Global Crossing fell $1.56 to $45.88, and Qwest fell $2.75 to $32.56, just 6.8 percent above the low end of the offer. Qwest was the most actively traded stock in U.S. markets, with 33.1 million shares changing hands.

"As the Qwest business plan continues to develop, this will recover," Nacchio said.

Global Crossing said it would not change its offer, which currently values U S West at $36.4 billion, or $60.93 a share, and Frontier at $12.92 billion, or $63.

The company does not have "plans to take action at this time," Robert Annunziata, Global Crossing's chief executive officer, said in a statement.

U S West and Frontier officials said they will review the new offers from Qwest.

Qwest is prepared to give U S West and Frontier shareholders more cash if Qwest's stock falls below the collar or to protect Qwest shareholders from more dilution.

"Because we are prepared to use cash to guarantee the value of these proposals, we are not required to issue a number of shares greater than that contemplated under our original offers," Nacchio said.

Pub Date: 6/24/99

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