Qwest Communications Makes $66.4 Billion Bid for US West and Frontier Corp.

Strategic Insights -

Qwest Communications International Inc., a Denver-based company, has made a bold move by offering to acquire US West and Frontier Corp. in a $66.4 billion hostile takeover bid. This merger would create a Denver-based company with an $87 billion market capitalization and 71,000 employees, making it one of the largest telecommunications companies in the US. The combined company would sell over $5 billion in long-distance services and provide local phone service in 14 Western states plus upstate New York.

Key Takeaways:

  • Qwest Communications has made a $66.4 billion bid to acquire US West and Frontier Corp. in a hostile takeover.
  • The merger would create a Denver-based company with an $87 billion market capitalization and 71,000 employees.
  • The combined company would sell over $5 billion in long-distance services and provide local phone service in 14 Western states plus upstate New York.
  • Qwest's offer includes paying $78 a share in Qwest stock for US West and up to $75 a share in cash and stock for Frontier.
  • Qwest has offered a premium of about 25 percent higher than Global Crossing's $63-a-share bid for both companies.
  • Qwest expects to hear from Frontier and US West within the week, and will go forward on either deal independently of the other.
  • The strategic benefits of the merger would work best with a three-way deal.
  • Global Crossing's existing contracts with Frontier and US West include a no-shop clause and $850 million in breakup fees.
  • Analyst Mel Marten of Edward Jones in St. Louis stated that the Qwest offer for US West "makes a lot more sense" than Global Crossing's bid.
  • The combination of Qwest and US West would be higher-growth than US West was on a standalone basis, but not as volatile as Qwest or Global Crossing.

Statistics:

  • Qwest's market capitalization would reach $87 billion if the merger is successful.
  • The combined company would sell over $5 billion in long-distance services.
  • Qwest would acquire US West's local connections in 15 states, including 35,000 DSL lines and 220,000 PCS subscribers.
  • Qwest would have 58,900 miles of combined domestic networks, plus KPNQwest's planned 8,100 miles in Europe.

Sources:

  • Qwest Communications International Inc.
  • US West Inc.
  • Frontier Corp.
  • Global Crossing Ltd.
  • Edward Jones
  • News wire services