NCR Still Raps AT&T; Bid but Will Meet to Consider It
NCR Corp. on Tuesday continued to angrily protest American Telephone & Telegraph’s unsolicited $6-billion takeover attempt, but analysts said directors of nation’s fifth-largest computer maker have few--if any--alternatives when they consider the offer at a special board meeting this morning.
Analysts said AT&T;’s apparent determination to acquire the company, plus its oft-stated willingness to increase its $90-per-share bid, leaves NCR directors with little room to maneuver--except to extract a higher price.
AT&T;, in its most aggressive move in recent years, has given NCR until 5 p.m. EST today to respond to its offer. The telecommunications giant has not specified how it will respond if NCR directors fail to answer the ultimatum or reject making any deal at all. But it has said that if negotiations break down, NCR shareholders should make the decision, setting the stage for a possible hostile tender offer.
“They probably will get a higher price, but ultimately the NCR board will have to go for it,” said John B. Jones, an analyst with Montgomery Securities in San Francisco. “It will be years before NCR can get its share price that high based on its own operations.”
Analysts speculated that NCR might accept an offer ranging from $95 to $100 per share, either as a stock swap, as AT&T; initially proposed, or as an all-cash deal, which AT&T; has said it is willing to make as well.
NCR stock, which jumped $24.75 per share on Monday, rose another $2 on Tuesday to close at $83.50. AT&T; stock, which skidded $2 on Monday, closed at $30.375 on Tuesday, up 25 cents in New York Stock Exchange trading. That NCR shares are still below the most current AT&T; bid shows that traders are still unsure whether the deal will go through and underscores Wall Street’s skittishness.
NCR still has several anti-takeover defenses at its disposal, including a shareholder-rights plan. It could also seek a friendly white knight bidder or undergo a restructuring, but NCR Chairman Charles E. Exley Jr. told employees Tuesday in a broadcast that he would not cripple the company by taking on too much debt. Exley also has acknowledged that he has held discussions with other unidentified potential partners.
Analysts, however, discounted most of these alternatives. “It’s a fait accompli ,” said Frank Governalli, analyst at First Boston in Atlanta.
AT&T; has said it wants NCR, a major supplier of computers to the financial services and retail industries, to bolster its own unfulfilled efforts to become a significant player in the increasingly important business of linking computing and communications networks.
However, Exley again reiterated his strong opposition to the takeover attempt, a position that company officials said stems from his fears that the dismal history of computer industry mergers will repeat itself.
In a letter to AT&T; Chairman Robert E. Allen released Tuesday, Exley said “the combination of AT&T; and NCR makes no sense from a business or strategic view,” and noted that the plan “would not create value and is filled with unacceptable risks.”
Exley concluded his terse letter saying: “We simply will not place in jeopardy the important values we are creating at NCR in order to bail out AT&T;’s failed strategy.”
But analysts and other observers discounted Exley’s strong words as an attempt to extract a higher offer from AT&T.; “It’s a lot like buying a house,” Jones noted. “You don’t expect your first offer will be accepted; there’s always a counteroffer. The whole process is one of bartering.”
In other developments Tuesday, an NCR shareholder filed a lawsuit against the NCR board, alleging that the directors have breached their duty by depriving shareholders of the chance to maximize the value of their stock. Meanwhile, Senate sources said NCR officials have sought a meeting with Sen. Howard Metzenbaum (D-Ohio) to detail their fears about the proposed buyout. Metzenbaum is chairman of the Senate Judiciary Committee’s subcommittee on monopolies and business rights.
Finally, a union representing 110,000 AT&T; employees encouraged NCR to oppose the buyout, saying it could lead to layoffs at both companies if AT&T; is forced to make cutbacks because of a high purchase price.
“I do not believe that AT&T;’s offer for NCR is in the best interest of your employee stakeholders nor those shareholders committed to the long-term business efforts of NCR,” James Irvine, vice president of the Communications Workers of America, said in a letter to Exley.
Analysts said they expect Allen, who would be publicly humiliated if he fails to make a deal, to keep pressing until he wins.
In a letter to AT&T; employees, Allen called the proposed deal a “key strategic step . . . with implications far beyond our computer business.”
Allen said he can foresee a day when “almost every transaction--whether an information request, a retail sale or a financial exchange--will be done electronically.” And he said the companies that add the most value as they handle the transactions--by collecting, processing and networking them--will be the leaders in the information marketplace of the future. “AT&T; must be one of them,” he said.
Allen also told employees that AT&T;’s current computer operations, which have lost upwards of $2 billion since their inception in 1984, do not offer the company the opportunity to “gain critical mass quickly enough” to become one of the leaders.
