Five telecom giants courting Newbridge
Prospect looms of bidding war for equipment maker
SIMON TUCK
Technology Reporter
Tuesday, November 23, 1999
globe and mail
Ottawa -- Five telecommunications giants are talking to Newbridge Networks Corp. about takeover bids, setting up the prospect of a bidding war for the
communications equipment maker.
The five potential bidders have struck up preliminary discussions with Newbridge officials, sources close to the company say, but no offers have yet been tabled.
Late last week, Kanata, Ont.-based Newbridge put itself on the auction block as it began to evaluate its strategic options. Those sources say Newbridge has since
received calls from: L.M. Ericsson Telephone Co. Inc. of Sweden, Nortel Networks Corp. of Brampton, Ont., Alcatel SA of Paris, Tellabs Inc. of Lisle, Ill.,
and Siemens AG of Munich, Newbridge's most important partner.
"Everybody you'd expect to be there is there," an industry source said.
If Newbridge is sold, analysts say, the buyer will likely have to pay between $44 and $60 a share, a 37- to 87-per-cent premium above the stock's current value.
Analysts say they expect the sale of Newbridge to happen sooner rather than later -- perhaps within the next month or two -- largely because Newbridge's value is
unlikely to increase. Its flagship product is getting older and the company acknowledges that it has been losing ground to Lucent Technologies Inc. of Murray
Hill, N.J., in the crucial U.S. market.
A Toronto financial analyst said it would be surprising if any of these leading telecommunications players didn't at least "kick the tires" on Newbridge before
deciding whether or not to make a bid.
"I'm sure they are [at least interested]," the analyst said. "These sorts of opportunities don't come around every day."
Robert MacLellan, a technology analyst at Canada Trust Securities Inc. in Toronto, said all five should be considered serious candidates to buy Newbridge. "By no
means is it a done deal but it's a hell of a lot more likely than it was a week ago."
Newbridge could not be reached for comment. Spokesmen for Nortel and Siemens refused comment on the matter yesterday. Officials from Tellabs, Ericsson
and Alcatel couldn't be reached for comment.
Three of the five -- Nortel, Ericsson and Alcatel -- were mentioned last week by Newbridge chairman and chief executive officer Terence Matthews as possible
suitors for his company. Mr. Matthews, when speaking to employees, also mentioned archrival Cisco Systems Inc. of San Jose, Calif.
The Globe and Mail reported earlier this month that Ericsson and Alcatel were both pondering bids for Newbridge. Tellabs said last week that it held preliminary
discussions with Newbridge in March, and Nortel has said that it looked at buying Newbridge last year but instead opted to buy Bay Networks Inc. of Santa
Clara, Calif.
Sources say Cisco, the undisputed leader in making gear for data communications networks, has not shown any interest in Newbridge.
The announcement that Newbridge was for sale follows months of speculation that the data communications specialist would not be able to withstand the
pressures to combine forces with a larger voice equipment maker.
Investors, anxious to take advantage of a deal that would likely include a takeover premium, have been boosting Newbridge's share price for much of the past two
weeks. The stock climbed 75 cents to $32.05 yesterday on the Toronto Stock Exchange, after falling to as low as $20.60 earlier this month.
But a minority of analysts say they're cynical that Newbridge is floating the takeover talk to boost its stock.
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