Rumour mill gives boost to
Newbridge shares
Alcatel cited as only one of a number of suitors
Michael Lewis and Jill Vardy
Financial Post
Renewed takeover
speculation boosted
the shares of
Newbridge Networks
Corp. yesterday, but
analysts said the
rumoured suitor,
France's Alcatel SA,
could be just one of
several firms making
discreet inquiries about
the Ottawa company.
"I would say
Newbridge is getting
more [solicitations] in
the past week and a
half than in the past
few months," said
Robert MacLellan,
technology analyst at
CT Securities in
Toronto.
"People are bottom
fishing," Mr.
MacLellan said, adding
any company with an interest in Newbridge would now "unofficially
open the channels of communication.
"Even if one in 10 of the rumours about people wanting to buy
Newbridge are true," he said, it's clear the company has been looked at
by several potential suitors. L.M. Ericsson Telephone Co. was
rumoured to have made an informal offer in July for more than $60 a
share, which was rejected by the Newbridge board.
Analysts say Alcatel has engaged Morgan Stanley Dean Witter to assess
Newbridge's value and assist with the initial overtures, though a
spokesman for Morgan Stanley declined comment, as did officials with
Newbridge and Alcatel.
Alcatel, which supplies high-tech equipment used by global
telecommunications companies, is said to be weighing a bid for
Newbridge in the $24 (US) to $25 (US) a share range, or the equivalent
of $4.3-billion (US), a premium of more than 45% over the value of
Newbridge stock on Monday.
"It depends on the premium, and I think that would be enough," said
Ajay Diwan, a telecommunications analyst at Goldman Sachs in New
York.
Newbridge, which makes digital gear used to move multimedia
transmissions over telephone and data networks, has been a hotly
rumoured takeover target largely due to disappointing financial results
over the past year.
With fierce competition in the telecommunications equipment market
raising doubts about Newbridge's ability to compete as an independent
company, investors were further spooked last week when the firm fired
its president, Alan Lutz, and warned that earnings would once again
miss analysts' expectations.
Even more worrisome were indications that sales of Newbridge's
flagship telecommunications switches, based on asynchronous transfer
mode technology, fell in the United States.
Newbridge's ATM switches have long been the company's cash cow,
and represented the one product line in which Newbridge was
consistently winning major contracts against larger rivals. Newbridge is
on the verge of introducing a new high-speed switch into the market in
the next month.
Analysts say Terence Matthews, the company's CEO and largest
shareholder with a 22% stake, is determined to turn Newbridge around,
and is unlikely to agree to a sale at current market valuations.
Newbridge had sales of $1.2-billion (US) over the past 12 months, has a
solid cash position, no debt, and continues to generate profits.
But Mr. MacLellan said if Newbridge continues to turn down offers it
may become a "shopped deal" -- a bankers' term for a company that has
rejected or been rejected by too many potential acquirers.
"That can be very dangerous, especially if Newbridge changes its mind
at some point and decides it wants to be bought," he said.
Alcatel, for its part, has seen its sales tumble by nearly 39% since early
October and is believed to be seeking new product lines. Newbridge
shares rose $1.50 to close at $25.90 in Toronto yesterday. The stock
reached a 52-week high of $60.50 in January.
Questions about whether Newbridge's $490-million (US) stock
purchase of Sunnyvale, Calif.-based Stanford Telecommunications Inc.
will proceed, meanwhile, could be answered as early as today, said
John Lawlor, Newbridge spokesman.
A deal is being hammered out that could see Newbridge compensate
Stanford because of a provision in the agreement that calls for
renegotiation if the average Newbridge share price falls below $24.
Rumour mill gives boost to
Newbridge shares
Alcatel cited as only one of a number of suitors
Michael Lewis and Jill Vardy
Financial Post
Renewed takeover
speculation boosted
the shares of
Newbridge Networks
Corp. yesterday, but
analysts said the
rumoured suitor,
France's Alcatel SA,
could be just one of
several firms making
discreet inquiries about
the Ottawa company.
"I would say
Newbridge is getting
more [solicitations] in
the past week and a
half than in the past
few months," said
Robert MacLellan,
technology analyst at
CT Securities in
Toronto.
"People are bottom
fishing," Mr.
MacLellan said, adding
any company with an interest in Newbridge would now "unofficially
open the channels of communication.
"Even if one in 10 of the rumours about people wanting to buy
Newbridge are true," he said, it's clear the company has been looked at
by several potential suitors. L.M. Ericsson Telephone Co. was
rumoured to have made an informal offer in July for more than $60 a
share, which was rejected by the Newbridge board.
Analysts say Alcatel has engaged Morgan Stanley Dean Witter to assess
Newbridge's value and assist with the initial overtures, though a
spokesman for Morgan Stanley declined comment, as did officials with
Newbridge and Alcatel.
Alcatel, which supplies high-tech equipment used by global
telecommunications companies, is said to be weighing a bid for
Newbridge in the $24 (US) to $25 (US) a share range, or the equivalent
of $4.3-billion (US), a premium of more than 45% over the value of
Newbridge stock on Monday.
"It depends on the premium, and I think that would be enough," said
Ajay Diwan, a telecommunications analyst at Goldman Sachs in New
York.
Newbridge, which makes digital gear used to move multimedia
transmissions over telephone and data networks, has been a hotly
rumoured takeover target largely due to disappointing financial results
over the past year.
With fierce competition in the telecommunications equipment market
raising doubts about Newbridge's ability to compete as an independent
company, investors were further spooked last week when the firm fired
its president, Alan Lutz, and warned that earnings would once again
miss analysts' expectations.
Even more worrisome were indications that sales of Newbridge's
flagship telecommunications switches, based on asynchronous transfer
mode technology, fell in the United States.
Newbridge's ATM switches have long been the company's cash cow,
and represented the one product line in which Newbridge was
consistently winning major contracts against larger rivals. Newbridge is
on the verge of introducing a new high-speed switch into the market in
the next month.
Analysts say Terence Matthews, the company's CEO and largest
shareholder with a 22% stake, is determined to turn Newbridge around,
and is unlikely to agree to a sale at current market valuations.
Newbridge had sales of $1.2-billion (US) over the past 12 months, has a
solid cash position, no debt, and continues to generate profits.
But Mr. MacLellan said if Newbridge continues to turn down offers it
may become a "shopped deal" -- a bankers' term for a company that has
rejected or been rejected by too many potential acquirers.
"That can be very dangerous, especially if Newbridge changes its mind
at some point and decides it wants to be bought," he said.
Alcatel, for its part, has seen its sales tumble by nearly 39% since early
October and is believed to be seeking new product lines. Newbridge
shares rose $1.50 to close at $25.90 in Toronto yesterday. The stock
reached a 52-week high of $60.50 in January.
Questions about whether Newbridge's $490-million (US) stock
purchase of Sunnyvale, Calif.-based Stanford Telecommunications Inc.
will proceed, meanwhile, could be answered as early as today, said
John Lawlor, Newbridge spokesman.
A deal is being hammered out that could see Newbridge compensate
Stanford because of a provision in the agreement that calls for
renegotiation if the average Newbridge share price falls below $24. |
