Mating Takes Time, MCI

I've heard it said that love at first sight happens all the time. Certainly the reverse is true. There are some people you just know aren't for you. Can the same thinking apply to corporate marriages? Sure, if you're MCI (Nasdaq: MCIP  ) .

Last week, the teetering telco accepted a $6.75 billion bid from Verizon (NYSE: VZ  ) , despite an $8 billion offer from my local phone company, Qwest Communications (NYSE: Q  ) . As of this writing, The Denver Post reports that at least four MCI shareholders have sued to block a deal with Verizon.

The suits are a question of fairness, writes Al Lewis, the Post's business columnist. In a column over the weekend, Lewis cited legal filings that claim the MCI board met for no more than an hour to evaluate Qwest's richer offer. He's got a point.

Yeah, I know Qwest is the punk of the Baby Bells. And, yes, I'm aware the firm is destroying shareholder equity. But, contrary to prevailing opinion, a deal with Verizon isn't a no-brainer. For example, Verizon would take at least a year to close the deal. Qwest CEO Richard Notebaert said in a letter to MCI that his company could do a deal in six months less time.

And then there's the question of which combination of companies would fit together best as a whole. There doesn't appear to be much overlap between MCI and Qwest. But Verizon's bid has every appearance of wanting only to not be outdone by SBC Communications' (NYSE: SBC  ) purchase of AT&T (NYSE: T  ) . Is keeping up with the Joneses of the telco industry really the right strategy to enhance shareholder value?

Face it, Fools: MCI's board is acting way too quickly. It has taken the corporate equivalent of a nanosecond to choose Verizon and snub Qwest. And that's just plan silly. Corporate directors really don't have it all that hard, and they typically are well-compensated for their comfy perches. Shouldn't we all expect more than batting eyelashes and mating-call cooing when the tough job of evaluating competing merger offers arises? Yep. In fact, that's the least shareholders deserve.

For related Foolishness:

Fool contributor Tim Beyers is no fan of Qwest, but he also remembers how bad the company used to be. Give the offer a look. What do you think? Share your take at the MCI discussion board. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking his Fool profile, which is here. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 490598, ~/Articles/ArticleHandler.aspx, 9/2/2014 6:06:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement