Frontier on Monday refused to act on a takeover offer from Qwest, a decision that could prompt the telecommunications company to take its US$11.4 billion takeover offer to Frontier's shareholders.
In a letter to its own shareholders on Monday, Qwest said it might consider new ways to encourage U S West and Frontier to accept unsolicited bids worth a combined US$48 billion.
Traders said the letters indicate the No. 4 US long distance company may change its bidding strategy and launch hostile offers, in an attempt to circumvent the companies' management.
See also: Qwest Sweetens Bid for Telcos- - - - - -
"They're letting them [their shareholders] know they're going to do what it takes to win. But it would be very difficult to get inside Frontier and U S West through a hostile -- they have very good takeover defenses, so their [Qwest's] best bet is to go through the front door," said one arbitrageur who declined to be named.
After meeting Monday, Frontier's board of directors said the company was "continuing to evaluate the revised proposal by Qwest Communications to acquire Frontier" but said Frontier still planned to go ahead with a merger with Global Crossing.
In a prepared statement issued late Monday, Qwest said it "would not revise its current proposal to acquire Frontier" especially in light of the company's weaker financial state. U S West has said it would evaluate the Qwest offer in due course.
Qwest maintained its offer is was superior to Global Crossing's, adding, "We would expect ... Frontier's shareowners' best interests would be served by a prompt affirmation to our offer so that we can proceed together."
U S West's board of directors is scheduled to meet later this week to evaluate Qwest's latest $34.7 billion stock offer.
Qwest on Wednesday raised its offers to buy Frontier, a local and long distance phone company, and local telephone carrier U S West. The offer is a second attempt to wrest the two companies away from merger agreements with Global Crossing.
Like Qwest, Global Crossing is planning to build global fiber-optic networks for high-speed Internet traffic.
