Qwest, CenturyLink shareholders OK merger

 

Denver Business Journal

by Greg Avery

August 24, 2010

 

Qwest and CenturyLink shareholders, voting separately Tuesday, overwhelmingly approved merging the companies and creating the nation’s third-largest land line telecom.

Nearly 97 percent of voting Qwest shareholders cast ballots in favor of the all-stock deal selling control of Denver-based Qwest Communications International Inc. (NYSE: Q) to its Monroe, La.-based acquirer and creating a 16 million-line telecom.

 

“I think it shows shareholders see the value of this deal just like our board did,” said Ed Mueller, Qwest CEO and chairman.

An identical percentage of CenturyLink Inc. shares were voted in support of the deal Tuesday, too. The company’s special meeting on the merger approval was held in Monroe at the same time as Qwest’s.

 

Qwest executives announced its vote tally at a special shareholder meeting at the Marriott City Center across the street from Qwest’s headquarters skyscraper in downtown Denver.

Shareholder approval had been expected. Fewer than 100 of them attended the meeting.

Unless regulators block the deal, the Qwest’s Denver operation will become a smaller, regional hub for CenturyLink Inc.

CenturyLink is acquiring a 50.5 percent, controlling stake in Qwest through a $10.6 billion stock swap. When Qwest debt is included, the deal has a value of about $22 billion.

Qwest corporate counsel Rich Baer and Mueller fielded a few questions about the deal from a few representatives of Qwest’s 49,000 retirees drawing pension, health insurance or other benefits.

 

Mary Taylor, local vice president of the Communication Workers of America, announced that the large telecom union does not endorse the merger. It remains concerned that about the lack of specificity in the companies’ post merger plan and the possibility the deal will “sacrifice worker jobs for synergies and higher dividends,” Taylor said.

The salaries of Qwest workers will be protected for a year following the merger. There is some nervousness within Qwest’s ranks that CenturyLink will not only shed Qwest jobs, but eventually lower remaining workers’ pay, too.

 

Mueller, who will stay on the board of the merged company but will not serve in management, appeared pleased and relaxed after the vote. But, he said, the company was too busy with merger integration planning to consider shareholder approval of the merger cause for celebration.  “I don’t think today was a worry zone for us,” he said. “We’ve got plenty of work to do.” 

 

Each Qwest share will be exchanged for 0.1664 shares of CenturyLink (NASDAQ: CTL).  The deal represented a 15 percent premium over the Qwest stock price the day deal was struck by the companies’ boards, April 21. That spread narrowed over the past four months.  Shareholders should be pleased that CenturyLink’s shares have held steady in the months after the deal’s announcement, Mueller said.  CenturyLink recently increased is forecasts for free cash flow this year. On Tuesday, it declared a 72.5 cents per-share quarterly cash dividend. Qwest currently has a quarterly dividend of 8 cents a share.

 

Qwest’s special shareholder meeting was a quiet affair that took little more than half an hour. Mueller briefly mingled with a handful of people after the vote before heading back to his office on the top floor across the street.  “Leaving already?” asked a hotel staffer as Mueller walked to the escalator.  “We’ll be back,” Mueller said.  “Sure you will,” the woman replied.  “Hey, we’re not leaving this world,” Mueller said emphatically.  “You are leaving this part of it,” she said.