Qwest Communications International Inc. decided against renewing a takeover bid for MCI Inc., the No. 2 U.S. long-distance telephone company.
"Qwest does not plan to submit a new offer," said Bob Toevs, a spokesman for Qwest, the fourth-biggest U.S. local-phone company. Qwest directors met Monday and discussed whether to make a new bid after prompts by MCI shareholders, including Deephaven Capital Management LLC.
The decision closes the door on the battle with Verizon Communications Inc., which has agreed to buy MCI. As recently as last week, Qwest Chief Financial Officer Oren Shaffer said the company was watching Deephaven's effort to corral MCI shareholders to vote against Verizon's $8.44 billion offer at a meeting Oct. 6.
Qwest withdrew its previous $9.75 billion takeover bid in May after MCI sided with Verizon. At the time, the company said it might re-enter the bidding if MCI shareholders rejected Verizon's offer.
"There is no shareholder contingent large enough to do anything to change or reverse this deal before it goes through," said American Technology Research analyst Albert Lin, who rates Verizon's shares "buy" and doesn't own them. Any move by shareholders to block the merger would be perceived as "risky and desperate," Lin said.
MCI shares fell 18 cents to close at $25.33 Tuesday in Nasdaq Stock Market composite trading and had averaged $25.60 in the past six months, close to Verizon's offer of $26 a share.
Verizon shares fell 15 cents to $31.85 in New York Stock Exchange composite trading, and Qwest rose 4 cents to $3.90.
"We're looking forward to our shareholder vote on the Verizon merger next week," said Brad Burns, an MCI spokesman. He declined to elaborate on the Qwest statement. Verizon spokesman Peter Thonis declined to comment.
Verizon Chief Executive Officer Ivan Seidenberg and Qwest CEO Richard Notebaert want MCI, based in Ashburn, Va., for its 140-nation phone-and-data network and its contracts with large clients such as Airbus SAS. MCI's larger rival AT&T Corp. is being swallowed by SBC Communications Inc., the second-largest U.S. local-phone company.
To succeed in defeating Verizon's agreement to buy MCI, Deephaven would need holders of a majority of MCI shares to vote against it.
MCI shareholders including Leon Cooperman said they would vote against the Verizon deal only if Qwest put forward a new offer before the shareholder vote.
Qwest failed to win the earlier battle with Verizon even after generating support from large MCI investors including Deephaven, Bill Miller of Legg Mason Inc. and Cooperman, who runs Omega Advisors Inc.
Notebaert said the bidding was skewed against Qwest after MCI CEO Michael Capellas and the company's board repeatedly chose lower offers from Verizon.
MCI's board at the time said that New York-based Verizon, the biggest U.S. local-phone company, makes a better partner because it's bigger and more financially sound than Qwest, which has about $17 billion of debt.
Deephaven said in June that it would urge other MCI shareholders to vote against the MCI-Verizon combination.
Contributing: Timothy W. Doyle