MCI faces shareholder fury

Moody merger gets moodier

By John Oates • Get more from this author

Posted in Financial News, 22nd February 2005 11:08 GMT

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MCI, which last week agreed to be bought by Verizon, has been forced onto the defensive over the deal.

Michael Capellas, MCI's chief executive, is under pressure to explain why he took the lower offer for the firm. Verizon offered $6.7bn to buy MCI, which the board accepted. But a rival $8bn bid from Qwest was rejected.

Rebel MCI shareholders are so unhappy at the deal that some have started court action. MCI directors are accused of breaching their fiduciary duties - their legal responsibilities as board members.

Shareholder Paul Pojanowski filed a lawsuit in the Delaware Chancery Court on Friday. The case describes Verizon's offer for MCI as "unconscionable, unfair and grossly inadequate". It asks the board to hold an open auction for the firm and give proper consideration to Qwest's rival offer, according to the FT. Institutional investors representing more than ten per cent of MCI's stock have already said they are unhappy with the deal.

Carlos Slim, MCI''s largest single shareholder, is still to make up his mind on the merits of the merger.

Capellas insists Verizon offers a more secure future for MCI. ®