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Qwest Communications Urges U S WEST Board to Enter Into Discussions Regarding Business Combination

Strategic Insights

— 2 min read

Qwest Communications International Inc., a leading provider of broadband Internet-based data, voice, and image communications, has written a letter to Solomon D. Trujillo, Chairman, President, and CEO of U S WEST, Inc., urging the U S WEST Board to enter into discussions regarding a business combination. The letter, dated June 22, 1999, was written by Joseph P. Nacchio, Chairman and CEO of Qwest. The letter highlights the benefits of a Qwest-U S WEST business combination, including increased value for U S WEST shareholders, greater realizable synergies, and a true merger that aligns with the strategic vision of both companies.

Key Takeaways:

  • The Qwest proposal offers a value to U S WEST shareholders higher than the value of the Global Crossing offer, with a closing price of $65.30 per share (7% more than the Global Crossing offer) and $63.65 per share (4.3% more than the Global Crossing offer), assuming different acquisition agreements.
  • Qwest stock is stronger, more stable, and more liquid than Global Crossing stock, with a substantial public float and lower historical volatility.
  • Qwest offers greater realizable synergies and upside potential than Global Crossing, with specific, identifiable, and quantifiable synergies aggregating approximately $9.3 billion to $9.75 billion through 2005.
  • The Qwest proposal offers the benefits of a true merger, with a single class of stock and end-to-end connectivity, whereas the Global Crossing proposal includes a tracking stock that may create long-term conflicts.
  • Qwest has a well-established business and operations, a fully constructed network, and a proven management team with a record of significant accomplishments, while Global Crossing lacks a track record at the company and relies on a proposed business plan.
  • The letter emphasizes the importance of implementing the strategic vision of U S WEST through a business combination with Qwest, which would better align with the company's stated goals.

Statistics:

  • Qwest's stock price has increased from $54.875 to $58.313 per share, or 6%, since Friday, June 11, 1999, the last trading day before Qwest made its offer.
  • The Qwest offer is worth $65.30 per share (7% more than the Global Crossing offer), assuming Qwest enters into an acquisition agreement with Frontier Corporation, and $63.65 per share (4.3% more than the Global Crossing offer), assuming Qwest does not enter into such an agreement.
  • Qwest's proposed synergies aggregating approximately $9.3 billion to $9.75 billion through 2005.
  • The Qwest Macro Capacity(R) Fiber Network spans more than 18,500 route miles in the United States, with an additional 315-mile network route to be completed by the end of the year.
  • Qwest has a substantial public float and lower historical volatility compared to Global Crossing.

Sources:

  • Qwest Communications International Inc. letter to Solomon D. Trujillo, Chairman, President, and CEO of U S WEST, Inc., dated June 22, 1999.
  • Qwest Communications International Inc. press release, dated June 22, 1999.

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