Two Qwest Communications International Inc. (Q) investors are suing the company as CenturyTel Inc. prepares its $10 billion stock-swap takeover.
Lorrieann Martin and Mark Respler say the deal is worth too little to Qwest stockholders; they’ve asked a judge to stop the acquisition and pay damages. Qwest is not commenting on the lawsuit.
Martin and Respler complain Qwest directors may not be maximizing value for shareholders and that selling at a “relatively low current trading price in a recession-depressed market raises serious red flags,” according to the filing, via Bloomberg.
Qwest and CenturyTel, based in Louisiana, shocked the telecom industry on April 22 with the announcement that CenturyTel will pay 0.1664 shares for each Qwest share. Shares of Qwest closed 1.53 percent higher on Monday at $5.31. CenturyTel’s closed at $34.50.
The deal is worth $10.6 billion up front and $22.4 billion once Qwest’s debt is taken into account. Qwest is the nation’s third-largest phone company. CenturyTel is No. 5. Many Qwest-watchers believe M&A of this nature has been in the making for a long time because the company has had a hard time competing with giants like AT&T and Verizon. Qwest has never able to do much in the wireless arena, stunting its growth as a company.
CenturyTel and Qwest have landline operations in 40 states, so if this deal gets the necessary regulatory approval, it will have a major impact. The pair will reportedly have 18 million phone lines across the country; however, that number is still small compared to Verizon and AT&T. Just last year, CenturyTel bought Embarq Corp., which operated landlines once owned by Sprint.
When the deal closes, CenturyTel shareholders will own slightly more than half of the combined company, which will be headquartered in CenturyTel’s home base of Monroe, La.