| Tech Stock News and Analysis |
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| Thursday, August 10, 2006 |
Relieved investors sent ADC Telecommunications Inc. shares up Thursday after the broadband maker said it terminated its plan to buy Andrew Corp., which sent shares of the coaxial cable maker lower.
In May, broadband equipment maker ADC agreed to give Andrew shareholders .57 of a share of ADC for each Andrew share in a deal valued at about $1.6 billion. However, since the offer, shares of the Eden Prairie, Minn.-based ADC slipped about 35 percent, making the deal less lucrative for Andrew shareholders. The companies agreed to terminate the deal late Wednesday.
Westchester, Ill.-based Andrew also rejected an unsolicited rival bid issued Monday from CommScope Inc. for $1.51 billion in cash and assumption of $186 million in debt, calling the offer "wholly inadequate." Hickory, N.C.-based CommScope makes cable for data, voice and video transmission.
Baird U.S. Equity Research analyst Kenneth W. Muth called the outcome "satisfactory for all companies involved." He said Andrew will pay ADC $10 million in breakup fees and will pay an additional $65 million if Andrew merges with another company within one year.
The analyst said Andrew posted third-quarter results July 27 that show better revenue and margins, though he's concerned that the company's price increases won't offset higher costs for copper. Muth reiterated a "Neutral" rating on Andrew's stock.
Jefferies & Co. analyst Bill Choi reiterated a "Hold" rating on Andrew and also called the deal "untenable." He said he does not expect CommScope or another bidder to try to acquire Andrew.
Jefferies analyst George C. Notter maintained a "Hold" rating on ADC shares and said the termination of the deal was the right choice for the company due to merger risks. He also noted that the company was better off terminating the deal rather than increasing the offer since its share price declined so much.
"Although the transaction was reasonable strategically, the deal's viability came into question as ADC's share price rapidly eroded," he wrote, a situation that was amplified by the company's profit warning issued in late July. The "superior" CommScope offer gave ADC an "out," wrote Notter.
Shares of ADC Telecommunications jumped $1.22, or 9.6 percent, to $13.87 in afternoon trading on the Nasdaq. The stock has traded between $11.81 to $27.90 and is down about 35 percent since making its acquisition announcement May 31 to a Wednesday close at $12.65.
Andrew shares fell 81 cents, or 8.5 percent, to $8.74, on the Nasdaq with quadruple its average daily trading volume. The stock has traded between $7.08 to $14.25 in the past 52-weeks and is down about 11 percent since the beginning of the year.
CommScope fell 23 cents to $27.94 on the New York Stock Exchange. |
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