MCI Tells of Stock Filing by Leucadia
The nation’s No. 2 long- distance carrier could be in play.
MCI Inc. disclosed Monday that Leucadia National Corp., a holding company with other telecom assets, was seeking antitrust clearance to buy more than 50% of MCI’s stock for an estimated $2.8 billion. The news sent MCI shares up 17%.
Leucadia has notified MCI -- which changed its name from WorldCom after emerging from an accounting scandal that forced a Chapter 11 bankruptcy filing -- that it intended to file for approval by the Federal Trade Commission and the Department of Justice to purchase the majority stake, MCI said.
MCI spokesman Peter Lucht would not comment on whether New York-based Leucadia had been in contact with the company beyond providing notice of its government filings. The notice does not mean Leucadia has actually made an offer to obtain a controlling stake, he said, noting, “there is nothing actionable here for the board of directors.”
Donna Moshe, a Leucadia spokeswoman, said the company had no comment.
MCI’s decision to publicize the notice from Leucadia may be a signal to other potential buyers that they should make an offer quickly, said John Ryan, president and chief analyst of telecom consulting firm RHK.
“The implication is MCI is going to have an ‘Under New Management’ sign pretty soon,” he said.
MCI, which emerged from U.S. Bankruptcy Court protection in April, and its chief rival, AT&T; Corp., have been weakened by price wars and court rulings that will probably increase their costs to compete in the lucrative local-service market.
“Despite the deteriorating fundamentals, we believe Leucadia’s bid for MCI will open the door to other bids,” said Romeo A. Reyes, a telecom analyst for Jefferies & Co.
In June, the Wall Street Journal reported that Sprint Corp., SBC Communications Inc. and BellSouth Corp. had done preliminary evaluations of buying Ashburn, Va.-based MCI.
Spokesmen at both SBC and Sprint declined to comment Monday. A spokesman for BellSouth did not immediately return a call seeking comment.
But Blaylock & Partners telecom analyst Rick R. Black said a purchase by one of the regional Bells was unlikely.
“There’s very little value in MCI’s consumer business,” he said. A regional Bell would only want the company’s transport network and top-tier business customers, he said, and a breakup of MCI would be unlikely to get regulatory approval.
MCI shares rose $2.45, or 17%, to $17.05 in over-the-counter trading. Leucadia gained $1.12 to $50.05 on the New York Stock Exchange.
