Company shows interest in MCI
By Ellen Simon
Associated Pressated Press
NEW YORK — The nation's No. 2 long-distance carrier could be in play.
MCI Inc. disclosed yesterday that Leucadia National Corp., a holding company with other telecom assets, is seeking antitrust clearance to buy more than 50 percent of MCI's stock for an estimated $2.8 billion. The news sent MCI shares up 17 percent.
New York-based Leucadia has notified MCI, which changed its name from WorldCom after emerging from an accounting scandal that forced the nation's largest ever bankruptcy, that it intends to file for approval from the Federal Trade Commission and the Department of Justice to purchase the majority stake, MCI said in a brief news release.
MCI spokesman Peter Lucht would not comment on whether Leucadia had been in contact with the company beyond providing notice of its filings.
The notice does not mean Leucadia has actually made an offer to obtain a controlling stake, he said. "There is nothing actionable here for the board of directors," he said.
Donna Moshe, a Leucadia spokeswoman, said the company had no comment.
The fact that MCI publicized 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 bankruptcy protection in April, and its chief rival AT&T Corp., the nation's largest long-distance carrier, have been weakened by price wars and court rulings that will likely 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 at Jefferies & Co.
In June, The Wall Street Journal reported Sprint Corp., SBC Communications Inc. and BellSouth Corp. had done preliminary evaluations of buying MCI.
Spokesmen at both SBC and Sprint declined to comment yesterday. 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 is unlikely.
Leucadia is a holding company that owns businesses ranging from telecommunications provider WilTel, formerly called Williams Communications Group, to a Spanish copper mine to a Hawai'i hotel. Leucadia bought the Aston Waikiki Beach Hotel at a foreclosure sale in mid-2001.
Leucadia had $2.03 billion cash and investments at the end of January, according to Standard & Poors.
A low-profile company, Leucadia has 5,269 employees, according to S&P.
Leucadia has experience with companies emerging from bankruptcy. It bought WilTel out of bankruptcy and, in partnership with Warren Buffett's investment company Berkshire Hathaway Inc., ran bankrupt lender Finova.
WilTel owns fiber optic loops in 36 cities including New York, San Francisco and Philadelphia. Its largest customer is SBC Corp., which accounted for 65 percent of its revenues in 2003. In its annual report, Leucadia lists MCI as one of WilTel's competitors.
MCI, based in Ashburn, Va., filed for bankruptcy protection in 2002 as an $11 billion accounting fraud imploded. The company has a "poison pill" provision in its bylaws that would make a takeover more difficult and expensive.
Shares in MCI rose nearly 17 percent, or $2.45, to $17.05 in over-the-counter trading. Shares of Leucadia gained $1.
