Alcatel-Lucent SA (ADR) (NYSE:ALU) has been manufacturing telecom equipment for years, but its struggle hasn’t come to an end. Experts thought that the best way for the firm to get through this difficult phase would be to get acquired by a company. As soon as the reports about Nokia Corporation (ADR) (NYSE:NOK)‘s interest in buying this firm hit the media platforms, investors became happy and hopeful, but not for very long. They seem to hate this deal for obvious reasons.
Acquisition News Didn’t Do Any Wonders To Alcatel-Lucent Stock:
The acquisition news was expected to take the stock prices of Alcatel-Lucent to new heights, but it didn’t go as per the plans. Once the news came into light, the stock prices of the telecom equipment manufacturer dropped to the level where they were before the announcement. It was a clear indication that investors didn’t like this deal at all.
Terms of This Deal Have Played Their Part:
Initially, the share prices of Alcatel surged by 25% in a hope that Nokia would help it coming over its poor financial condition. But as soon as the terms of the deal were revealed, investors lost their cool. Both the firms had agreed to execute an all-stock deal in which shareholders of Alcatel would get 55 shares of Nokia for every 100 shares they owned. All in all, one-third shares of the combined entity would be held by Alcatel shareholders while two third would be held by Nokia shareholders.
All the Alcatel shareholders were disappointed in two ways. First, they were thoughtful that any movement in Nokia’s shares would affect their return as well. Apparently, Nokia has also performed badly in the market after making sure that it would merge with Alcatel. The second worry was the premium they were offered. They had expected a lot better premium than what they received, which caused them to lose their cool.
