July 12 (Bloomberg) -- MCI Inc., less than three months out of the largest U.S. bankruptcy, said Leucadia National Corp. is seeking U.S. government approval to buy a controlling stake in the company. Shares of MCI rose as much as 15 percent.

Leucadia, a New York-based company that has bought distressed businesses from pipelines to insurers, will seek clearance to buy at least 50 percent of MCI, Ashburn, Virginia- based MCI said in a statement. MCI’s market capitalization was about $4.6 billion on Friday.

Leucadia’s plan may entice other companies to bid for MCI, the No. 2 U.S. long-distance phone provider, said Patrick Comack, an analyst at Guzman & Co. While long-distance revenue has slumped, MCI’s emergence from Chapter 11 under new Chief Executive Michael Capellas allowed it to shave $35 billion of debt while retaining one of the world’s largest Internet networks.

``They might have kicked off a bidding war,’’ said Miami- based Comack, who rates the stock ``outperform’’ and said he doesn’t own the shares. BellSouth Corp. and SBC Communications Inc. may consider a bid, Comack said.

Shares of MCI rose $2.39 to $16.99 at 2:48 p.m. in over-the- counter trading. Its 6.69 percent notes maturing in 2009 rose 1.1 cent on the dollar to 93.75 cents, traders said. The bonds would be repurchased by MCI at 101 cents if more than 50 percent of the company is acquired, according to the notes’ indenture.

Shares of AT&T Corp., the largest U.S. long-distance provider, rose 85 cents, or 5.9 percent, to $15.22 in New York Stock Exchange composite trading. Leucadia rose $1.06 cents to $49.99. Leucadia has a market value of $3.47 billion.

Investing in Distress

Leucadia, run by Chairman Ian Cumming and President Joseph Steinberg from offices in Salt Lake City and New York, is targeting MCI after buying WilTel Communications Group Inc. out of bankruptcy last year.

``Their history is one of investing in distress,’’ said Keith Trauner, senior analyst in Short Hills, New Jersey, at the Fairholme Fund, which held 485,000 Leucadia shares as of May. ``They see some value in MCI, and we tend to agree.’’

Leucadia is not well known because ``it’s a non-promotional company,’’ he said. Leucadia’s black-and-white Web site doesn’t describe the company, its management or include any pictures. It lists Leucadia’s business addresses and links to corporate policies and regulatory filings.

Cumming and Steinberg, who graduated in the same Harvard Business School Class in 1970, started Leucadia 25 years ago. Cumming, a Vancouver native, and Steinberg, 60, each own about 13 percent of Leucadia’s shares.

With Warren Buffett’s Berkshire Hathaway Inc., Leucadia financed Finova Group Inc.’s emergence from bankruptcy in 2001. Leucadia is also seeking to buy Plains Resources Inc.

Antitrust Clearance

A purchase by Leucadia would need antitrust clearance under the Hart-Scott-Rodino Act before proceeding, MCI said. Leucadia will seek approval from the Federal Trade Commission and Justice Department, MCI said.

Under the rules, a company must seek permission before increasing a stake in another beyond 15 percent. The government has 30 days to review it. Leucadia’s review period will be up Aug. 9, MCI said.

Leucadia spokeswoman Donna Moshe declined comment. MCI spokesman Peter Lucht declined comment beyond the statement.

Falling Revenue

Leucadia is the first company to show interest in buying MCI since it emerged from Chapter 11 in April.

Capellas, brought in to run MCI, then named WorldCom Inc., in December 2002 after an $11 billion fraud plunged the company into bankruptcy in July of that year, has said he isn’t preparing the company for sale.

MCI, which ranks second to AT&T Corp. in long-distance, also has a so-called poison pill provision to thwart unwanted takeovers by offering shareholders discounted stock when another company acquires more than a 15 percent stake.

Weeks after emerging from bankruptcy protection, MCI said it would post a loss for 2004 and that revenue would tumble 14 percent. AT&T and MCI have slashed prices to keep customers and win new business as companies such as BellSouth and SBC begin to offer long-distance services.

MCI’s bankruptcy allowed it to reduce its debt to $5 billion. It emerged with Mexican billionaire Carlos Slim as its largest shareholder with 13.5 percent.

Private investment firm ESL Partners LP, run by Eddie Lampert and MatlinPatterson Global Opportunities Partners L. P. are the second- and third-largest, according to government filings.

BellSouth spokesman Jeff Battcher declined comment on whether his company would bid for MCI. SBC spokesman Selim Bingol also declined to comment.

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Emma Moody at emoody@bloomberg.net.