When was the last time you saw a company get bought out at a value lower than the closing price on the day before the transaction was announced? That's exactly what happened when French telecom company Alcatel announced it was merging with Lucent.
On Sunday, it was announced that Lucent shareholders will get 0.1952 shares of Alcatel, or about $3.01 per share. On Friday, Lucent had closed at $3.05. That's some premium, huh?
During a conference call announcing the deal, Lucent CFO John Kritzmacher explained the below-market price, by saying that Lucent shares had traded higher as news of the deal leaked out. He's right, the stock traded up almost 7 percent on rumors of a merger from $2.81 the day before. I'm sure that premium was comforting to longtime Lucent holders, who saw the company's share fall from highs in the sixties a few years ago to its current place on the bargain rack.
The $13.4 billion deal is being billed as a "merger of equals," but, like the Daimler Benz-Chrysler merger, it's clear who's buying who. For starters, Alcatel shareholders will get 60 percent of the combined shares. The company will be headquartered in Paris. Alcatel has more revenue and more employees. And while Lucent CEO, Patricia Russo will run the combined company, Alcatel CEO Serge Tchuruk will assume the position of non-executive chairman.
Perhaps the "equals" label is a bid to head off criticism by those that don't want to see a French company taking over the entity that owns Bell Labs. The fabled research facility isn't just the home of such historic innovations as the transistor, lasers, the fax machine, and motion pictures with sound, it also does a lot of work for the U.S. Department of Defense. Fearing a backlash like the Dubai ports debacle, the company smartly set up an American subsidiary that will be headed by "three American citizens." (I know those guys, they'll do a great job.)
Still, Wall Street seems to love the deal. Maybe Lucent shareholders are just happy to get something for their trouble. After all, at the rate it was trading, it was hardly worth the transaction costs to dump it.
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