GLOBE & MAIL, Sat. 19th:Newbridge, Alcatel shares slide in anticipation of deal
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Newbridge, Alcatel shares slide in anticipation of deal
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ French company likely to offer all-stock bid
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ SIMON TUCK
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Technology Reporter
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Saturday, February 19, 2000
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Ottawa -- Investors drove down shares in Newbridge Networks Corp. and prospective buyer Alcatel SA
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ yesterday in anticipation of a massive all-stock bid for the troubled communications equipment maker.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge tumbled 6 per cent on the Toronto Stock Exchange, falling $3.15 to $47.40 as investors reacted to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the $6.5-billion (U.S.) price tag placed on the anticipated Alcatel bid in news reports. That amount is just
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ barely above Newbridge's market value of $6.4-billion, as of Thursday's close.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "It's right at the market price," said Michael Urlocker, a technology analyst at Scotia Capital Markets Inc. in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Toronto. He said "hot-money speculators" were selling off the stock, disappointed at the seeming lack of a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ premium. "You don't speculate on a takeover stock assuming you can get a 1.5-per-cent premium."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Meanwhile, Alcatel fell $4.19 to $47.37 on the New York Stock Exchange on worries that the reported bid
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ value will be too much for the French telecommunications giant to digest.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "A lot of large acquisitions have led to a great deal of discomfort on the part of the buying company's stock,"
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ said Tom Burnett, president of New York-based research firm Merger Insight, adding that a Newbridge
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ acquisition remains speculation.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge has been on the auction block for three months, ever since it reported disappointing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ second-quarter results. Alcatel of France has been in the front rank of rumoured suitors much of that time, but
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ sources say that the two firms are now in the final stages of serious discussions. Many analysts are expecting
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ a deal to be announced by the end of the month, perhaps as soon as Tuesday when Newbridge reports its
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ third-quarter results.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The drop in Newbridge shares yesterday wipes some of the lather off the stock's steady gains since early
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ November, when it fell to a 52-week low of $20.60 (Canadian) following the company's leadership change
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and its latest revenue and profit warning.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge shares fell $2.63 (U.S.) or 7.4 per cent to $32.75 yesterday on the New York Stock Exchange as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ more than 4.8 million shares traded hands.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The selloffs followed reports yesterday that Alcatel will make a bid to buy Newbridge for $6.5-billion in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ stock. Prior to the reports, Newbridge's market capitalization was $6.4-million, leaving little room for a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ takeover premium.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge announced it was up for sale in November and hired investment banker Morgan Stanley Dean
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Witter & Co. to help with the process. Newbridge has since been surrounded by takeover talk that has fuelled
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the share price climb.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The Kanata, Ont.-based communications equipment maker, which has been reluctant to speak publicly in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ recent days, again refused comment yesterday. |
