Clint,
It looks like the CIEN/TLAB deal has triggered merger mania.
You old friend DIGI just got taken out by ALA. AFCI up 4.
ADCT up 2. Both on speculation they would be taken out too.
AFCI may be a target. I look for ADCT to be an acquirer instead.
Harry
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Thursday June 4, 1:00 am Eastern Time
Company Press Release
SOURCE: Alcatel
Alcatel to Acquire DSC Communications Corporation In a
Stock-For-Stock Transaction
PARIS, France, and DALLAS, June 4 /PRNewswire/ -- Alcatel (NYSE: ALA - news) and DSC
(Nasdaq: DIGI - news) jointly announced that they have entered into a definitive agreement
under
which Alcatel will acquire DSC in a stock-for-stock transaction. The acquisition will expand
Alcatel's presence in the United States telecommunications equipment market. The strong
position of
DSC in access and switching, fixed and mobile, coupled with Alcatel's leading position in
transmission will create a major company in the U.S. capable of providing turnkey systems to the
incumbent telecommunications operators as well as new domestic carriers.
Under the terms of the agreement, which has been unanimously approved by the boards of
directors
of both companies, DSC shareholders will receive upon consummation of the transaction 0.815
of
an Alcatel ADS (American Depositary Shares) which represents 0.163 Alcatel ordinary share, for
each outstanding DSC share. Based on the approximately 125 million fully diluted DSC shares
outstanding and the closing price of Alcatel's ADS on Wednesday, June 3, 1998 ($43 7/16), the
transaction has an implied value of approximately $4.4 billion. This represents a premium of
approximately 80 % over DSC's closing price per share on June 3, 1998 and 8 % over DSC 's
twelve months high of $32.75.
Taking into account cost savings, Alcatel expects the deal to be neutral on its 1999 earnings per
share and to be accretive thereafter. This does not take into account the effect of the substantial
revenue enhancement which should result from the transaction and which is its main purpose.
Serge Tchuruk, Chairman and CEO of Alcatel said, ''Alcatel's strategy is to be a preeminent
worldwide player in the evolution of networks from narrowband to broadband, with voice/data
convergence. This goal requires highly advanced broadband technology, already developed by
Alcatel, and a more commanding U.S. presence, which Alcatel is moving towards with its
acquisition
of DSC. This acquisition creates an outstanding fit between Alcatel's broadband ATM and data
technology and the strong market position that DSC has developed in access and switching.''
Mr. Tchuruk added, ''I want to emphasize that this combination is about growth, not just cost
cutting. As a result of this combination, DSC employees will have greater career opportunities
both
in the United States and internationally. They will play a critical role in the future of the new
s of Alcatel American Depository Shares, or approximately $35.40hem to build on the strengths
of the combined
company.''
James L. Donald, DSC 's Chairman and CEO, said, ''This transaction provides increased value
to
DSC shareholders. In addition, DSC shareholders will have an ongoing equity interest in a much
larger company with improved long-term growth potential and investment liquidity. The combined
operations of DSC and Alcatel in the U.S. should also benefit from DSC's established
relationships
with the Regional Holding Companies (RHCs), which provide an enhanced platform for future
growth.''
Completion of the transaction is subject to approval by DSC shareholders, the expiration or
termination of applicable waiting periods under the antitrust laws, registration under the U.S.
federal
securities laws of the Alcatel ADS's issuable in the transaction, and other customary closing
conditions. The transaction is expected to close in approximately four months.
Following the acquisition of DSC, Alcatel intends to combine DSC with its existing U.S.
telecommunications equipment business which is primarily conducted through Alcatel's wholly
owned subsidiary, Alcatel Network Systems, Inc. (ANS). Over the last years, ANS has achieved
a
leadership position in SONET transmission systems, with revenues growing 35% in 1996 and
1997,
and has become a leading player in the fast developing ADSL market.
The combined entity will continue to be headquartered in Texas, with 7,000 people employed in
the
Dallas area alone, and with significant operations in North Carolina and California. Mr. Krish
Prabhu, who is currently President and CEO of ANS, will serve as President and CEO of the
combined company. The proforma combined revenue for DSC and ANS for the twelve months
ended December 31, 1997, was approximately $3 billion. The companies expect annual savings
of
approximately $200 million to phase in initially in 1998 with a full year impact in the year 2000.
The two companies believe that there is a strong strategic fit which will be particularly productive
in
the next few years. A clear example is DSC's established leadership position in fixed access
systems
in the U.S. with major RHCs. While these systems are largely configured to support voice
services
today, Alcatel's world leading technologies in ATM and xDSL will help DSC accommodate the
fast
development of Internet related data services. Similarly, the intelligent networking products and
the
comprehensive switching product line of DSC will be optimized when combined with Alcatel's
latest
technologies. DSC's tandem switching activity will be supported by Alcatel's 1000 BBX
broadband
switch to handle the growing needs of voice and data traffic in public backbone networks. DSC's
current activity in cellular switching will be significantly enhanced by Alcatel's world-class digital
switching technology available for most mobile standards.
Alcatel is a world leader in telecommunications systems and equipment, with operations in over
130
countries. It provides complete solutions and services ranging from backbone networks to user
terminals for operators, service providers, enterprises and consumers. Alcatel Alsthom, to be
renamed Alcatel, has been up to now a multi-business company with revenues of $31 billion in
1997. It is currently reshaping its portfolio on its core business, telecom and cables, with a
dedicated
revenue of $22 billion in 1997. For more information, visit Alcatel via the web at:
alcatel.com.
DSC is a global provider of advanced telecommunications products, including digital switching,
transmission, access and network management systems. DSC's integrated network solutions
support
voice, data and broadband services, such as intelligent network, wireless and switched digital
video
applications. DSC had 1997 annual revenues of approximately $1.6 billion and is active in more
than
60 countries worldwide. For more information about DSC and its products, please visit the
company's web site: dsccc.com.
This document may include forward looking statements within the meaning of Safe Harbor
provisions of the U.S. federal securities laws. These statements are based on current
expectations,
estimates and projections about the general economy and Alcatel's and DSC's lines of business
and
are generally identifiable by statements containing words such as ''expects,'' ''believes,''
''estimates''
or similar expression. Statements related to future performance involve certain assumptions,
risks
and uncertainties, many of which are beyond the control of Alcatel or DSC, and cannot be
guaranteed. Important factors that could cause actual results to differ materially from those
expectation include, among others, foreign and domestic product and price competition, cost
effectiveness, changes in governmental regulations, general economic and market conditions in
various geographic areas, interest rates and the availability of capital. Although Alcatel and DSC
believe that their respective expectations reflected in any such forward looking statements are
based
upon reasonable assumptions, they can give no assurance that those expectations will be
achieved.
SOURCE: Alcatel
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DSC COMMUNICATIONS CORP. (DIGI) 19 11/16 CLOSED. Kudos should go out to the
negotiators of this maker of digital switching, access, transport and private network system
products as the company has been able to secure a significant premium in the sale of DIGI to
French-based Alcatel (ALA 43 7/16) for $4.4 billion in stock. Given the terms of the deal, Alcatel
will exchange 0.815 shares of Alcatel American Depository Shares, or approximately $35.40 per
share for each DIGI share. This represent close to an 80% premium and above the 52-week
high of 32 3/4 achieved last September. While shares of ALA are likely to fall in today's trading,
shareholders should be very happy with the deal signed by management as the premium being
paid by Alcatel is significant, particularly in light of the beating the stock has taken the past
several
months. True, DIGI was cheap in comparison to other telecommunications networking
concerns, but it seems that someone on the Alcatel side was asleep at the wheel as DIGI
probably
could have been had for a lower price. It would certainly have taken management a longer time
than signing an agreement for this deal to get the stock moving upwards again. In this case,
DIGI
management earned its salaries. After taking into accounts for acquisition related expenses, the
deal is expected to have little effect on Alcatel's earnings in 1999, while becoming accretive to
earnings thereafter. |
