BAY buyout rumors (via BAY thread)
Options Report: Bay Networks Up On Takeover Rumor
May 28, 1998 3:49 PM
By Steven M. Sears
NEW YORK (Dow Jones)--Takeover speculation on
Bay Networks Inc. is defining trading Thursday in the
networking-hardware company's call options.
Speculators are buying June 25, 27 1/2 and 30 calls in
the apparent belief that this months-old rumor will
materialize and move the stock. Bay Networks stock is
up 2 1/8 at 28 on heavy volume. Of the more than
27,000 contracts that have traded, more than 17,000
contracts have moved in these three calls. Average
trading volume is about 6,500 contracts.
The rumor on the Street is that Lucent Technologies Inc.
is interested in buying Bay Networks, but others
companies are interested in beating Lucent to the punch,
said Paul Foster, options strategist, at
1010WallStreet.com.
Other potential suitors are rumored to include France's
Alcatel-Alsthom, Canada's Northern Telecom, and
Ericcson Telephone Co.
The implied volatility of the Bay Network's options, and
trading volume, has been edging higher since last week,
indicating an increasing likelihood that the price of the
underlying stock will move up or down.
Bay Networks' implied volatilities generally range from
49% to 69%. Foster said he can't recall them reaching
such high levels. In the morning, the contracts had a
volatility of 64% and they have since moved into the
78% to 83% range. The question, however, is to see if
the volatilities can sustain themselves overnight,
something Foster said hasn't happened in more than 18
months.
The June 25 call is up 1 7/8 at 4 3/8 on volume of 5,586
contracts, compared with open interest of 14,427
contracts. The June 27 1/2 call is up 1 11/16 at 2 3/4 on
volume of 7,261 contracts, compared with open interest
of 7,088 contracts. The June 30 call is up 3/4 at 1 3/8
on volume of 5,995 contracts, compared with open
interest of 10,893 contracts.
___________________________________________________________________
Dow Jones - Bay Networks,Talk :Nortel,Lucent Seen As Possible Suitors
May 28, 1998 3:55 PM
A number of sources have said Bay Networks appears
willing to consider offers from interested suitors, and
several said they have heard that the company has
instructed its investment bankers to prepare financial
documents about the company to show potential buyers.
Bay Networks has been struggling to compete against
Cisco Systems Inc. (CSCO), the undisputed leader in
the computer networking industry, for some time.
Bay's disappointing March quarter results highlighted
that it was having some trouble ramping up its new line
of Accelar routing switches and that it faces a lot of
competition in the market for low-end workgroup
switches.
Wall Street has been speculating that it would make
sense for the big phone equipment companies to buy
data networking companies - including Bay Networks -
as the voice and data transmission markets begin to
converge. Only Cisco, which has been actively building
up its presence in the voice transmission market, is not
seen as a likely target since its leading market position
has made it quite expensive.
In addition to Nortel, Lucent Technologies Inc. (LU) has
also been named as a potential suitor for Bay.
Lucent, a giant in the voice equipment market, has been
actively acquiring and developing data networking
technology. The company is currently prohibited from
transacting pooling of interest deals because the it was
spun off from AT&T Corp. (T). But this two-year
moratorium will expire in October - giving Lucent more
flexibility to make large acquisitions.
Alcatel Alsthom (ALA), Ericsson Telephone Co.
(ERICY) and Siemens AG are also seen as possible
buyers for Bay.
Hambrecht & Quist Inc. analyst Farrokh Billimoria
noted that the takeover talk on Bay is likely to be
around for a while.
Sanford C. Bernstein & Co. analyst Paul Sagawa said
he does not believe Bay would accept an offer lower
than $40 a share, which would total about $9.2 billion.
He added that he believes the company could sell for 4
times sales - or about $42 a share - and possibly as high
as 4.5 times sales - or about $48 a share.
[ASND price going up...]
- Joelle Tessler; 201-938-5285
smartmoney.com. |
