|
U S West merger hung up?
|
 |
March 2, 2000: 2:48 p.m. ET
Baby Bell's shares sink on report intended partner Qwest may be bought by Telekom
|
NEW YORK (CNNfn) - Shares of Baby Bell U S West Inc. sank Thursday following news reports that Germany's Deutsche Telekom AG has won key backing for a buyout offer of Qwest Communications International Inc., which could disrupt Qwest's $36 billion purchase of U S West.
Philip Anschutz, co-founder, chairman and 39-percent owner of Qwest, reportedly held talks with Deutsche Telekom's Chief Executive Officer Ron Sommer last Sunday, at which Anschutz was said to have supported an offer for a deal with Telekom. The German company reportedly offered to purchase Qwest for at least $70 a share.
Shares of Denver-based U S West (USW: Research, Estimates), which according to reports may not have been consulted about the Qwest-Telekom talks, sank 8-1/4 to close at 70-3/4. But Qwest (Q: Research, Estimates), also based in Denver, closed up 1-3/16 to 59-3/16 and hitting as high as 69-7/16. On Wednesday, following similar reports, Qwest shares rocketed 13-3/4.
The American depositary receipts of Deutsche Telekom (DT: Research, Estimates) jumped 8-13/16 to 97-1/16 on the reports.
The stories about discussions between Deutsche Telekom and Anschutz emerged in USA Today and the Wall Street Journal Thursday. The reports come two days after U S West Chairman and CEO Solomon Trujillo announced that he would not become co-chairman of a combined Qwest-U S West, as had been first planned, amid disagreements on strategy and leadership.
Spokespeople for Deutsche Telekom, Qwest and U S West declined to comment about the reports, each citing a policy of not commenting on market rumor or speculation.
Analysts said the wild ride for the telecom companies' stocks Thursday stemmed from the suddenly new risk that the U S West-Qwest deal may not go through as originally planned - setting off a frenzy among arbitrageurs, who bet on the likelihood of a merger getting done.
According to the terms of their merger, at current share prices, Qwest is expected to offer 1.729 of its shares to shareholders of U S West for every share they own. That would give U S West shareholders about $102 per share - a far cry from the 70-3/4 a share closing price for U S West on Thursday.
"That is an awfully wide spread - at a minimum, people are confused," said Guy Woodlief, an analyst with Prudential Securities.
'Ain't over till it's over'
However, arbitrageurs said prying Qwest away from U S West would likely face legal troubles, because shareholders of both companies have voted in favor of the deal. U.S. regulators have also signed off on the merger, which is expected to close by this summer.
"Before, the chance that the merger was going to go through was very high," said Woodlief. Even though the risk of a Deutsche Telekom offer harming the Qwest-U S West deal is small, added Woodlief, "now, we have uncertainty. So, to put a spin-on Yogi Berra -- a deal isn't over till it's over."
Added Timothy Horan, an analyst with CIBC Oppenheimer: "I think with the reports saying that DT and Qwest may be talking, it's just showing people are concerned ... that there are going to be changes afoot. People think [Qwest is] going to abandon U S West."
Telekom: No stranger to buyout buzz
Deutsche Telekom, which has a stockpile of cash following recent stock offerings, has often been the subject of speculation it is on the buyout trail. Europe's largest telecom, Telekom last year suffered a public relations setback after its effort to buy Telecom Italia was trumped by Italy's Olivetti. The episode also sullied its relationship with one-time partner France Telecom.
And the cash will continue to flow in at Telekom. The company recently announced it would sell about nine percent of its T-Online Internet unit to the public, and is currently auctioning off pieces of its cable assets in nine regions in Germany.
In an interview last autumn, Deutsche Telekom's international chief, Jeffrey Hedberg, said the company wants to move away from bite-size acquisitions and focus on larger deals to expand its footprint worldwide. The company last August announced a $14 billion purchase of the British mobile phone operator One2One - which is among its largest acquisitions to date. 
|
|
|
|
|
 |
|
.
