Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn D. Rudolph who wrote (53773)	9/6/1998 1:26:00 PM
From: Pat Hughes	Read Replies (3) \| Respond to of 61433

Wow All the heavy hitters checking in this weekend (Glenn, Gary, Djane) It would be nice to see a run-up in Ascends stock price based on fundamentals and then let the merger speculation kick back in. In any case, I would like to see Ascend go it alone. Now that they have Startus they don't need the big partner to get into the door of all the huge telecom providers. (most of them use Stratus No-Fault systems) Q. If Lu does bid for Ascend. What does everyone see happening? Bidding war? 3Com/usrx type mess? Favorable reception on Wall Street? (Making us happy to own LU stock) Now Back to football. (I have every NFL game playing here in my little shop and the fans are going crazy) Pat Hughes Go Ascend

To: Glenn D. Rudolph who wrote (53773)	9/6/1998 2:46:00 PM
From: flickerful	Read Replies (1) \| Respond to of 61433

glenn... very good to see you as well. i appreciate your candid, and necessarily speculative reply. your insight is precisely what i had sought...[concerning, yes, the acquisition]. the reasons you have cited...the october pooling and the future threat of CSCO, compounded by the now convenient combined synergy ASND + SRA... seem to point in one direction: ASND. i wonder how any deal[ which may or may not already exist] be affected by the recent market malaise [which show little signs of abating].

To: Glenn D. Rudolph who wrote (53773)	9/6/1998 2:54:00 PM
From: Robohogs	Read Replies (3) \| Respond to of 61433

No disrespect Glenn - I respect your posts and its good to see you back here. I hope you were one of the winners in the AMZN blow-up. But with respect to SRA, given all of ASND's planned divestitures, it will be accounted for as a purchase even though it's with stock. And it is with ASND 20x 1999 P/E stock. LU could have done the same transaction using purchase accounting with 40x stock. I too believe LU has to buy ASND for strategic reasons and unlike Tim and others, I feel the price will be between $55-65, levels which will still be accretive to LU and which will provide for a premium to ASND shareholders. Using a 35% premium implies only $53 per share, although I would bet that if LU really wants ASND, they would pay a 50% premium ($58). Using calander 1999 estimates of $2.15 for LU, $1.70 for ASND, and $100 million of pre-tax cost savings yields pro forma 1999 eps of $2.19 for LU at a 0.8 exchange ratio. 0.75x would yield $2.20. Given the relative sizes of the companies and LU's astronomical P/E, the level of the exchange ratio barely impacts LU. Of more importance will be the synergies. BTW Tim, 0.5x results in a 3% discount for ASND and would yield $2.29 pro forma for New Lucent. No advisor would let that transaction occur. In terms of fairness, most transactions result in mild dilution or accretion in year 1 - especially transactions where the companies have such different sizes. Finally, LU stock will go down after the announcement no matter what - arbs will short LU and buy ASND. All takeovers introduce new risks. Transaction will be good for LU, but it will go down. Also don't look for an announcement before late October or early November. The companies (regardless of whether or not they have talked - which would spoil pooling BTW) cannot talk until Oct 1 and they must then produce a series of talks which looks like those between SRA and ASND once things got serious (see SRA merger proxy). Otherwise, SEC and IRS will question the pooling. Good luck all.

To: Glenn D. Rudolph who wrote (53773)	9/8/1998 2:56:00 AM
From: James A. Venooker	Read Replies (2) \| Respond to of 61433

Dear Glenn, I agree with your posting 100%. In fact, I believe the deal is already done, just not yet announced. I have learned that LU was targeting SRA and this may have actually have been their acquisition, as ASND didn't express any direct interest in SRA prior to mid summer. In addition, LU has a very close view of SRA operations. LU has a large office branch in Waltham, MA, about 20 minutes from SRA headquarters. LU knew a hell of a lot more about SRA than ASND did. I believe the SRA was a LU acquisition. I am hoping the deal is done and accounted for before March 1999. This would position LU-ASND in a very strong position heading into the Millenium. Regards, Jamie