AT&T; to Buy NCR Corp. for $7.4 Billion


American Telephone & Telegraph Co. announced Monday that it would buy NCR Corp. in a deal valued at about $7.4 billion, the biggest corporate takeover this year and one of the biggest since the merger mania of the late 1980s.

The merger will end the independence of NCR, a Dayton, Ohio-based firm that converted itself from a maker of mechanical cash registers into the country’s fifth-largest computer manufacturer. The deal gives AT&T; a new chance to become a significant player in the computer and data communications industry, a role it has unsuccessfully sought since the breakup of the Bell System in 1984.

The deal, which started as a hostile takeover bid six months ago but ended as a friendly merger, is expected to become final within five months.

Under terms of the merger agreement, NCR shareholders will get $110 worth of AT&T; shares for each NCR share. Because no cash is exchanged, the stock swap is tax deferred for NCR shareholders until they sell their AT&T; shares.


The takeover would be the biggest among U.S. high-technology firms and the largest merger of any type since Time Inc. and Warner Communications merged in January, 1990, in a $14-billion deal that created the world’s largest media company.

Despite a string of unsuccessful linkups between high-technology companies, NCR and AT&T; executives said their merger can buck the trend. Furthermore, AT&T; said, with NCR’s management and technical vision, the phone company can have a computer business capable of seriously challenging such industry heavyweights as International Business Machines and a host of hard-charging Japanese rivals.

AT&T;'s goal from the outset has been to realize its long-standing ambitions of marrying its telecommunications network, expertise and research with the multiplying opportunities emerging from computer-generated data transmission in virtually every aspect of modern commerce. Banks, supermarkets, airlines, department stores and manufacturing plants are just a handful of businesses depending on networks of inter-linked computers to conduct their everyday operations.

Although AT&T; has a telephone business spanning the globe, it has been unable to gain a strong foothold in the computer business, losing an estimated $2 billion in its attempts to do so. Finally, last year, AT&T; executives concluded that they could not go it alone and needed a partner to gain the size and strength required to compete in today’s global markets.


“The company that will emerge will be uniquely equipped for what customers will need in the future--global computer networks as easy to use and as accessible as the telephone network is today,” AT&T; Chairman Robert E. Allen said after signing the merger agreement. “The joining of these two companies will create a powerful competitor in the world marketplace for information systems.”

Although analysts were more skeptical, several agreed that the newly merged operation--which combines NCR’s $6.3-billion-revenue business with AT&T;'s $1.2-billion-revenue computer operations--has a chance of becoming a significant force.

“It won’t change the landscape of the computer industry overnight, and it won’t make IBM or Digital Equipment break out in hives,” said Ulrich Weil, a Washington computer analyst. “But the combined company will make a significantly greater impact than either company could have alone.”

In New York Stock Exchange trading Monday, NCR stock closed at $103.75 a share, up 25 cents, and AT&T; closed at $36.75 a share, down 37.5 cents.


One of the last sticking points to delay the merger was a demand by NCR Chairman Charles E. Exley Jr. that NCR shareholders be protected if AT&T; shares decline significantly in the months before the deal becomes final. The initial merger agreement specifies no exact ratio of AT&T; stock to be exchanged for each share of NCR. That will be determined according to the average price of AT&T; shares in the weeks before the deal’s closing.

However, the deal specifies that NCR shareholders will not receive more than 3.223 AT&T; shares, which effectively protects AT&T; if the phone company’s share price falls as low as $34.125. But, if AT&T; shares should suddenly spurt above $40.625, AT&T; will exchange no less than 2.708 shares for each NCR share.

The agreement is based on the stock swap’s being accounted for as a “pooling of interests,” an accounting procedure that essentially allows the companies to combine their operations, assets and liabilities.

However, if such an arrangement cannot be worked out or does not meet precise Securities and Exchange Commission regulations, AT&T; said, its all-stock offer would be converted to a deal in which 40% of NCR’s shares would be acquired at $110 in cash and the remainder swapped for 2.943 shares of AT&T; stock for each NCR share.


The merged NCR will operate as a unit of AT&T;, retaining its Dayton headquarters and name, with NCR executives in charge, AT&T; said.

The newly merged NCR will be headed by Gilbert P. Williamson, the computer firm’s current president, and Elton White, its executive vice president.

Analysts suggested that between 5,000 and 6,000 employees of AT&T;'s computer operations will lose their jobs.

NCR is perhaps the best known manufacturer of retail sales terminals--the electronic successor to the cash register. But the company also makes traditional computers, ranging from hand-held notebook-size machines to supercomputers.