Qwest Communications International announced on Sunday an unsolicited bid to acquire US West Inc and Frontier Corp for a total of $US55 billion in cash and equity. The deal will also see Qwest taking on $11.4 billion in assumed debt from US West and Frontier.
Should the deal go ahead, it will create a combined global communications company valued at $87 billion, Qwest said in a statement issued on Sunday. The surprise announcement pits Qwest against Bermuda-based long-distance company Global Crossing Ltd, which is already in the process of acquiring both US West and Frontier.
Last month, Global Crossing made a $35.5 billion bid for US West, and then raised its earlier offer for Frontier to $12.5 billion, up from the $11.2 billion it first bid in March.
"It's just a superior offer financially," Qwest chairman and chief executive officer Joseph Nacchio said at a press conference yesterday comparing his offer to Global Crossing's.
Qwest provides a more complementary match for US West and Frontier because the companies do not have a lot of market crossover, Nacchio said. The Qwest deal also will provide Frontier with some cash, he said.
"I think consumers are going to benefit as we expand broadband connectivity to their businesses and their homes," Nacchio said of what the deal will do for customers. "You're going to get new and better services.''In the earlier written statement, Qwest pointed to its successful handling of a sizable purchase last year when Qwest acquired LCI Communications Inc. for $4.4 billion. The deal made Qwest the fourth-largest US long-distance carrier. Qwest also said that its proposed three-way deal will result in total operating synergies of around $14 billion through 2005, including operating cost savings of between $6.7 billion and $7.1 billion.
Nacchio sent letters yesterday explaining his company's bids to US West chairman, president and CEO Solomon Trujillo and to Frontier CEO Joseph Clayton. In his letters, Nacchio said he is seeking meetings as soon as possible with both Trujillo and Clayton. US West and Frontier have acknowledged receipt of the letters, but have yet to make any further comment.
Nacchio said yesterday that he hasn't yet heard from the other executives and wouldn't expect to until they have met with shareholders. Those companies are bound to consider the Global Crossing offer, Nacchio noted in a point also made in a statement from Frontier acknowledging receipt of the unsolicited offer from Qwest.
Purchasing US West and Frontier would enable Qwest to move ahead in offering Internet communications and broadband services to a combined customer base of 31 million US users and businesses, Nacchio stressed during the press conference.
From Frontier, Qwest would get the company's 11 GlobalCenters for Web hosting and data center business, while from US West, it would obtain access to the carrier's 35,000 broadband local digital subscriber lines and 220,000 PCS subscribers, as well as US West's !nterprise data networking business with 200,000 Internet access customers. The combined Qwest, US West and Frontier entity would have its headquarters in Denver, employing about 71,000 staff, Qwest said.