Carlos Slim Gets Fat on MCI

Yesterday the Wall Street Journal reported that billionaire telco magnate Carlos Slim got a sweetheart deal from Verizon for his substantial number of shares in MCI.

You remember MCI - the telco with a heart. Bankruptcy proved to be a boon for the boys formerly from Clinton, MS. Emerging with a clean balance sheet and solid properties they were a perfect acquisition target. Big shot telco Verizon stepped up to the plate first and promptly lowballed them. Qwest got into the mix but since Qwest can't seem to get arrested in the world of M and A's they were promptly rebuffed (despite their higher offer).

Here's where it gets fun. Verizon secretly made an offer to buy Slim's shares for $2 more than Verizon was offering EVERYONE else for their shares (plus a call option on some Verizon shares).

So picture this one. You are the Chairman of MCI and you have already stated that you are rejecting an offer from Qwest (that is $4 higher than Verizon) under the guise that the Qwest offer will crush both companies.

Now Verizon, who stated their best offer is a little over $23 a share, has now paid MCI's biggest shareholder a 10% premium for his shares. Bottom line is that if MCI accepts Verizon's offer as is, the board should be summarily fired and forced to work in MCI's customer service department.

So here's where we are. Verizon is holding firm with their $23 a share offer. Carlos Slim (clearly not check to check as he is worth over 23Billion) has cashed out and Qwest is holding at $27. MCI's board has sheepishly suggested that Verizon's offer is "too low" and would like to see it raised. Alert the media on that one. Verizon has no need to raise its offer. MCI is on record not wanting to sell to Qwest and now you own 13% of the company courtesy of Carlos' shares.

MCI is hosed. If they take Verizon's offer they will leave $4 per share on the table. If they walk away all together their shares will go in the tank. Either scenario means they will get sued early and often.

Hawk's View: MCI's best option is to sell to Qwest. It gives them the maximum return to the shareholders (and it gives Carlos the proverbial finger for breaking ranks and selling out). Damn the consequences for the future Qwest/MCI company. It is best to take the money and run...