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Technology Stocks : BAY Ntwks (under House) -- Ignore unavailable to you. Want to Upgrade?

To: Greg Jenkins who wrote (6647)	6/18/1998 9:06:00 AM
From: tech101	Read Replies (2) \| Respond to of 6980

No matter how we see it, by simple math, NT and BAY's share prices should be at least 59 1/8 and 35 « respectively. There are 524.5 million NT and 221.9 million BAY shares outstanding. Before the merge announcement, NT and BAY share price were about $65 and $29 respectively, thus translating to a market value about $34 billion and $6.43 billion for NT and BAY. Based on yesterday's NT and BAY share prices, the total market value of NT+BAY is only ($52.5 x 524.5 + $30 x 221.9 =) $34.19 billion. By the planned merge agreement, each BAY share shall be converted to 0.6 NT share. So there will be a total of (524.5 + 0.6x221.9=) 657.64 million new NT shares. That means, by the pessimists' theory, NT is actually issuing (0.6 x 221.9 million =) 133.14 million new NT shares to acquire BAY almost worthless. Where can a more ridiculous story be found in the World?! NT is a world class telecommunication equipment manufacturer with a strong presence in the entire North America, Asia and Europe. NT is also a pioneer and the most aggressive telephone company in getting into data communications business. Only very few companies (such as LU, ERICY, and NOKA) in the world may effectively compete with NT in the telecommunication equipment business in terms of size, management, and technology. On the other hand, BAY has the most advanced technology in data communications business. BAY's 10/100/1000 Ethernet and ATM switches, high-speed routers and remote access systems (RAS), and in particular, their network management systems always ranked highest in the industry. The merge of NT and BAY makes perfect sense for the convergence of data, voice, and video communications. Even without additional value for the combination, using share prices of NT and BAY before the merge announcement, NT should have a price of ($34 billion + 6.43 billion) / (524.5 million + 133.14 million) = $61.48 while BAY should be priced at slightly less than 0.6 * $61.48 = $36.9 At the worst scenario, suppose BAY were valued at $4.88 billion ($22/share), each NT share should be worth ($34 billion + $4.88 billion) / 657.64 million = $59.12 while BAY should be worth slightly less than 0.6 x 59.12 = $35.47.