Friday, March 24, 2006

Lucent Alcatel merger

Today's news is that there may be a merger between Lucent and Alcatel. The news apparently sent Alcatel's share price up, but it's a bit too early for me to see what is going to happen to Lucent. Whoops, actually since writing that sentence I checked again and now that trading has started it's up almost 10% today!
I bought 200 shares of LU in March of 2003 when it was $1.69. I didn't have a whole lot to go on but I thought there was a chance the company would recover from its woes... and I figured that even if it didn't, I'd only lose a couple hundred bucks! A couple of people I mentioned it to thought I was nuts for buying this stock, but so far it's worked out fairly well. I've often wished I had bought more of it!
What I don't know is how this merger will affect my shares-- will they turn into shares of Alcatel? Will they stay Lucent? Will they go up? Down?
I don't know nothing about merging no companies...


Money Turtle said...

Looks like this is going a merger of equals so Alcatel is not going to pay any kind of premium for Lucent. The market likes this deal because of the synergies and cost savings. That's why Lucent and Alcatel have been going up. You'll receive new shares in the combined company.

Anonymous said...

Typically the shares of the acquiring company either fall or stay about the same. The stock of the acquired company, however, rises most of the time. This is because the market usually believes the acquiring company paid a premium (and overpaid) for the target, punishing the acquirer and rewarding the target. It all depends on the synergies, though.