AT&T; Poised for Hostile Takeover of NCR Corp. : Technology: Analysts call the telephone company’s move a classic ploy to bring the computer firm back to the bargaining table.
American Telephone & Telegraph said late Wednesday that it will begin today a hostile $90-per-share cash tender offer for NCR Corp. after the computer company rejected AT&T;’s earlier $6.1-billion bid and demanded a price of nearly $8.4 billion.
The moves, coupled with NCR’s subsequent tightening of its anti-takeover defenses, set the stage for what analysts said could be a protracted, messy and expensive fight for control of the nation’s fifth-largest computer company.
More likely, however, would be a peaceful, negotiated settlement at a price somewhere between the $90 per share now offered by AT&T; and the $125 per share demanded by NCR on Wednesday as a condition to enter into merger talks, analysts said.
“This is a classic poker game,” said Ulric Weil, a technology analyst in Washington. “AT&T;’s hostile ploy is designed to get NCR back to the table, and NCR’s demands are designed to extract a higher price for the shareholders. NCR will have to yield. The only question is at what price.”
NCR stock, which had risen $26.75 per share, or 53%, since AT&T; announced its takeover proposal Sunday afternoon, climbed another $3.125 on Wednesday to close at $86.625 on the New York Stock Exchange. AT&T; shares, the most actively traded on the Big Board, fell 25 cents at $30.125 a share.
Both NCR’s rejection of AT&T;’s earlier acquisition bid--which would have involved exchanging $90 worth of AT&T; stock for each NCR share--and AT&T;’s announcement that it would pursue a hostile tender offer, were made after the close of trading.
As part of its offer to enter merger talks with AT&T; at $125 a share, NCR said the phone company must agree to enter into a confidentiality agreement and refrain from further action on a takeover while the talks proceed.
Whatever the outcome, analysts said they have been surprised by AT&T;’s unusually aggressive move to bolster its still-unfulfilled aspirations of becoming a major player in the increasingly important business of computer telecommunications.
Since divestiture of the regional Bell companies in 1984 freed AT&T; to enter the computer industry, it has struggled to create a successful business, losing billions of dollars in the process. And the nation’s largest phone company has candidly admitted that its bid for NCR, a former cash register maker turned international computer vendor, is an attempt to acquire what it has been unable to build on its own.
AT&T;’s aggressive move to have NCR bail out its fumbling computer operations has apparently angered NCR executives who have repeatedly rejected the overtures and pledged to resign if the acquisition is completed.
Alleging that the proposed combination “makes no business sense,” NCR Chairman Charles E. Exley Jr. on Wednesday again characterized the acquisition as “a desperate attempt to salvage AT&T;’s disastrous foray into the computer business.”
In a letter to AT&T; Chairman Robert E. Allen, Exley said the NCR board believed its shareholders and other stake holders “are best served by continuing to build NCR’s enormous inherent value as an independent company.”
Nevertheless, Exley said, the NCR board is prepared to negotiate a merger if AT&T; offers to pay no less than $125 per share, a price that would put the deal at $8.37 billion--the most costly ever in high technology and the largest acquisition of any type this year.
In a letter delivered late Wednesday to Exley, Allen pointed out the inconsistency of NCR’s position. “We do not understand how you can maintain . . . that a merger at $125 in AT&T; stock would continue NCR’s success and be a good deal for your shareholders, but a merger at $90 would be a strategic disaster,” Allen said.
“Chuck,” he continued, “all we have is a difference of opinion on price. We should let your shareholders decide.”
With that, Allen said, AT&T; had “no choice” but to launch a cash tender offer.
If successful at that price--a big question given the strong anti-takeover defenses of NCR--the tender offer could give AT&T; direct control of the Dayton, Ohio-based company. More likely, analysts said, the move would pressure NCR to come back to the bargaining table.
NCR officials said late Wednesday that its board would meet within the next 10 days to decide how to advise its shareholders on the tender offer.
AT&T; said its tender offer, being managed by Morgan Stanley & Co., the company’s investment bankers, would expire on Jan. 4 unless extended. NCR has approximately 68 million shares.
NCR directors strengthened the company defenses against an unwanted takeover Wednesday by amending its shareholder rights plan to provide newly issued rights after a raider acquires 15% of the company’s common stock, down from 20%. The rights in effect would dilute the NCR stock holdings of an unwanted suitor, making a takeover prohibitively expensive.
Although analysts said they expect AT&T; to ultimately prevail, they continue to express concern that an unnecessarily hostile and protracted acquisition could undermine the company’s original intentions for seeking the merger.
Noting that even the most friendly high technology mergers have been less than successful, analysts said a forced marriage could ultimately prove a disaster.
“AT&T; needs NCR’s management; that’s why they’re buying the company,” said Craig Ellis, a telecommunications analyst at C.J. Lawrence in New York. “This deal isn’t like buying a cellular business franchise where any management will do. “
