Verizon to Buy MCI for $5.3 Billion

After months of discussions, MCI has chosen a suitor. Verizon announced today it will acquire MCI for $4.8 billion in stock and $488 million in cash. Qwest, which had been in buyout talks with MCI for months, was pushed aside last week when market leader Verizon expressed interest in the long distance company.

In the deal, MCI stockholders will receive 0.4062 shares of Verizon for each share of MCI, which is equivalent to $14.75 per share. MCI shareowners will also receive $1.50 per MCI share in cash. In addition, MCI plans to pay its stockholders quarterly and special dividends totaling $4.50 per share.

Combining the equity, cash and dividends, the deal values MCI shares at $20.75, making for a total transaction of $6.746 billion.

Verizon's primary interest in the acquisition stems from MCI's reach into enterprise and Internet markets. MCI has the largest Internet backbone following its buyout of UUNet, and handles much of the global Internet traffic. With MCI's assets, Verizon is also poised to better compete for enterprise customers with wireless and IP-based offerings.

"This is the right deal at the right time," said Verizon CEO Ivan Seidenberg. "The acquisition will significantly enhance our customer service and competitive positioning by giving us a global reach, a suite of IP-based and value-added services, and a powerful, broad base of large-business and government customers."

Verizon says the two companies will pool resources to strengthen their Internet backbones for customers and deliver higher quality services.

"Combined with Verizon's financial strength and record of operational excellence, we will accelerate delivery of next-generation services, broaden our product portfolio and better serve our customers," said Michael Capellas, MCI president and CEO.