Investment group Leucadia National Corp is planning to make a bid for MCI Corp as the second largest US long-distance operator struggles to find its feet after emerging from the world’s largest ever bankruptcy.
Leucadia has told MCI that it plans to file with the Federal Trade Commission and the US Department of Justice to seek clearance to acquire at least 50% of MCI’s stock. Its move could prompt a bidding war for MCI, which is in a weak financial position as it battles to cut losses.
In its former guise as WorldCom, the company eventually wrote off $79.8bn from its assets, but is now battling for financial respectability and hopes its stock will be relisted on Nasdaq, instead of the current over-the-counter market.
Initial progress is hardly encouraging. For its first quarter to March 31, MCI recorded a loss of $388m, down from income of $58m on revenue 13% lower at $6.29bn. The company is engaged in a round of job cuts to stem losses.
New York-based Leucadia, which has a history of investing in out-of-favor sectors, moved into communications last November when it acquired WilTel Communications Group Inc, formerly Williams Communications Group Inc, as it emerged from Chapter 11 proceedings.
Whoever gains control of MCI will give its lawyers a busy time. Earlier this month, MCI filed a lawsuit against former CEO Bernie Ebbers to recover more than $400m in loans and interest.
And the SEC and a federal judge are engaged in probes of WorldCom’s use of a tax shelter. This will strengthen the case in more than a dozen US states that have sued the company, claiming it used the shelter to dodge taxes. The claims could add up to $2.75bn.