Investors Seem Skeptical AT&T Can Close TCI Deal In 9 Mos.
June 25, 1998 2:50 PM
By Stephane Fitch
NEW YORK (Dow Jones)--Apparently, the stock
market isn't completely convinced that AT&T Corp. (T)
and cable-TV operator Tele-Communications Inc.
(TCOMA) can close their big merger in nine months.
At mid-afternoon Thursday, TCI Series A shares are
trading at a 13.8% discount to the price that AT&T has
agreed to pay holders when the deal closes.
Investors usually bid up the stock of an acquisition target
to a price just shy of what the buyer has agreed to pay.
The "spread" between TCI's price and the amount
AT&T will pay is wider than is typical for other mergers,
according to arbitragers - investors expert at making
money off stocks in a takeover.
"But considering everything that could derail this, the
spread's about where it should be," one arb said.
AT&T's deal with TCI will have to pass muster with
hordes of local, state and federal regulators.
Although most observers believe that it's unlikely the
deal will be derailed, one arb said, "I think there's a real
possibility it'll take longer than nine months to get
everybody to sign off."
If the deal takes longer than the expected nine months to
complete, that could shave points off the total return to
arbitragers.
Arbs see another risk in TCI Chairman John Malone,
who The Wall Street Journal described Wednesday as
"shrewd deal-maker who isn't above shaking hands and
then walking away." Under Malone, TCI agreed in 1993
to merge with Bell Atlantic Corp. (BEL). Malone let the
deal unravel amid internal bickering over everything from
dividend policies to regulatory issues.
Then there's the raw fear of the unknown.
"A lot can happen in nine months," an arb said. "We've
got an election coming up - who knows what the
politicians will promise by November?"
Considering all the risks, the spread looks tight to Guy
Wyser-Pratte.
"The buzzword these days is monopoly," said Eric
Longmire, director of research at Wyser-Pratte & Co.
"The competition's probably going to call their
congressmen - the spread should be even wider."
Recently TCI Series A were trading at 39 1/4, down
1/2, and AT&T shares were at 58 11/16, down 1 5/16.
- Stephane Fitch; 201-938-2202 |
