zbyslaw: This just posted by Reuters at 0643 am Friday 18th Feb 2000.
Tom D.
Friday February 18, 6:43 am Eastern Time
Alcatel off on talk of Newbridge bid
PARIS, Feb 18 (Reuters) - Shares in telecoms equipment maker Alcatel tumbled on Friday as traders cited talk it was mulling a capital increase to fund a possible acquisition of Canada's Newbridge Networks Corp (Toronto:NNC.TO - news) (NYSE:NN - news), seen as a poor investment by the market.
At 1049 GMT Alcatel was down 4.25 percent at 248 euros, having hit a low of 245 euros, in turnover of 141 million euros. The blue-chip CAC-40 was up 0.19 percent at the time.
``There's a rumour of a capital increase for the acquisition of Newbridge,' said one trader.
``The stock always goes easy on the recurring rumour it might buy Newbridge because sentiment is negative on Newbridge -- it's issued a lot of profit warnings and people don't really know why Alcatel is talking to them.'
Newbridge has been the target of acquisition speculation since November, when it announced it had hired an investment bank and was open to offers after posting its sixth earnings warning in 10 quarters.
Alcatel has frequently been cited as a possible suitor, and speculation reached a new pitch on Thursday after sources said it was the only one left in the running. Both companies declined to comment.
Analysts said any purchase of Newbridge would be risky, expensive and probably dilute Alcatel's 2000 earnings per share.
``People are getting worried. It's a highly risky investment which would cost a lot,' said one analyst.
``Either they pay in shares, in which case they would have to issue new ones, or they pay in cash, which would take Alcatel's gearing from around 19 percent to 60 or 70 percent,' he added.
Sources noted, however, that Alcatel and Newbridge were technically a good fit as Newbridge makes ATM switches for the backbone of wide-area networks (WAN), which would give Alcatel 15 to 20 percent of the world market.
But the analyst said that any Newbridge buy would have a dilutive impact of between five and ten percent on Alcatel EPS in 2000, be neutral in 2002 and only positive from 2003. |
