Sources: Nortel to snap up Bay by next month
[$40 for BAY? I think ASND's price just went up...]
networkworld.com
By Jim Duffy and Sandra Gittlen
Network World Fusion, 5/15/98
Northern Telecom, Inc. is looking to purchase
Bay Networks, Inc. within the next four or five
weeks, according to Bay and Nortel business
partners who requested anonymity.
Nortel would like to announce the Bay acquisition
at the Supercomm '98 trade show in Atlanta the
week of June 8, the sources said. These sources
added that Nortel did indeed make an offer for
Bay before last week's NetWorld+Interop '98
show in Las Vegas.
Reports circulated early this week that Nortel
made this offer and that Bay rejected it for a
higher price. This reported volley, which Bay and
Nortel declined to comment on, boosted Bay's
stock price by 16%.
The amount of the alleged offer is not known, but
observers say it was between $32 and $35 per
share, or $7.3 billion to $8 billion. Bay shares are
currently trading at $26.38.
Observers believe Bay will agree to be acquired
for $40 per share, or $9.1 billion. The company's
market cap is currently $5.5 billion.
Nortel would like to grab Bay before October.
October is when Nortel rival Lucent
Technologies, Inc. could bid for Bay in a pooling
of interest transaction, which may be preferable to
a cash purchase for a deal of this size.
Because it is majority-owned by Canadian
telecom giant Bell Canada Enterprises, Nortel is
precluded from pooling stock to buy an American
company. Pooling of interests allows companies to combine balance
sheets and report higher earnings without tax impact. Lucent was
prohibited from pooling for two years after being spun off from AT&T.
Nortel and Bay officials did not comment.
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