McI Shareholders By 2 75 Per Share example essay topic

Who were the parties in the negotiation? The parties in the negotiation we role played were: (1) Verizon Communications (2) MCI Communications (3) Qwest Communications Verizon Communications Inc. is one of the world's leading providers of communications services with more than $71 billion in annual revenues. Verizon has a diverse work force of more than 210,000 in four business units: Domestic Telecom serves customers based in 29 states with wire line telecommunications services, including broadband, nationwide long-distance and other services. Verizon Wireless owns and operates the a nation wide wireless network, serving 43.8 million voice and data customers across the United States. Information Services operates directory publishing businesses and provides electronic commerce services. International includes wire line and wireless operations and investments, primarily in the Americas and Europe.

(Fisch, 2005) MCI, Inc. (NASDAQ: MCI) is a global communications provider who provides advanced communications connectivity to businesses, governments and consumers. The have the benefit of owning their global data networks which made them attractive for acquisition in the first place. Additionally they have over 10,000 large business clients allowing Verizon immediate expansion of their client base. (Fisch, 2005) Qwest Communications International Inc. is a Denver based company which provides voice, video and data services and employs more than 40,000 employees. (Qwest. com, 2005) What was the final outcome?

After a difficult battle with Qwest, Verizon Communications Inc. announced it had agreed with MCI, Inc. to amend the terms of the agreement to acquire MCI. The MCI Board of Directors is recommending approval of the amended agreement to its shareholders. The aggregate cost of the acquisition stands at $8.5 billion. Verizon will acquire MCI for $23.10 per MCI common share, not including the 40 cents per share cash dividend recently paid by MCI to its shareholders. MCI's shareholders will receive $23.50 per share including the recent 40- cent dividend.

Under the revised agreement, MCI shareholders will receive total cash of $8.35 per share of MCI common stock. This represents up to $5.60 per share in special cash dividends (not including the 40 cents per share recently paid by MCI) and $2.75 per share in cash consideration. Verizon increased the cash consideration to be paid to MCI shareholders by $2.75 per share. In addition, MCI intends at the time of shareholder approval to accelerate payment of a $1.50 per share dividend for a total of up to $5.60 in dividends, less any interim dividends paid. Ivan Seidenberg, Verizon's chairman and CEO, said, 'Verizon and MCI together create a formidable and highly competitive company delivering a full range of mission-critical voice and data products to businesses and government.

We believe our agreement with MCI represents superior value and is a compelling proposition for MCI's shareholders, customers, employees and creditors. ' (Thon in, 2005) What were the alternatives to a negotiated agreement? Were the parties aware of these alternatives? The "Best Alternative to a Negotiated Agreement" (BAT NA) (Bazerman, 2002) was never really a consideration for the parties involved other that Qwest. Their best alternative for Qwest, after Verizon stepped up, was to increase the monetary value of their offer which was precarious based on their current financial situation.

Verizon used their current financial status and the strength of their company to entice MCI to except a lower priced bid with a stronger prospect of success. Qwest's only alternative after the final Verizon bid was to withdraw from negotiations. MCI on the other hand achieved the value they were seeking for the merger early and had little to do but pick the best deal for their stockholders. Both deals were going to make them money in the merger. Verizon knew that what ever offer was made by Qwest, they could counter with the strength of their company and its financial status and business reputation.