Per the prospectus the receipt of Nokia shares is expected to be a taxable event for U.S. federal income tax purposes."
Actually, the broker may be right about the capital gain tax on the ALU-NOK exchange for US investors.
If taxation applies to ALU investors in France then why shouldn't it apply to ALU ADS in US, after all the ADS is a certificate representing the same stock.
"Capital Gains Taxation Pursuant to the provisions of Article 13 of the France-Finland Treaty, the capital gains derived from the transfer of Nokia Shares by individuals residing in France are taxable in France, subject to the capital gains not being attributable to a permanent establishment or a fixed place of business in Finland" -prospectus
If you don't tender it would seem you'll be getting a second offer later on based on the prospectus.
"According to Article 232-4 of the AMF General Regulation, if the Exchange Offer is successful and if Nokia holds less than 95% of the share capital and voting rights of Alcatel Lucent, the subsequent offering period will commence in connection with the French Offer within ten French trading days following the publication of the results of the French Offer (taking into account the results of the U.S. Offer) by the AMF, for a period of at least ten French trading days. Prior to the commencement of the subsequent offering period, the AMF will publish a reopening notice.
Following the expiration of the subsequent offering period, the AMF will announce the results of the French Offer (taking into account the results of the U.S. Offer) by a notice which will be published no later than nine French trading days following the expiration date of the subsequent offering period of the French Offer and Euronext Paris will indicate in a notice the date of settlement of the subsequent offering period of the French Offer."
“If more than 50% of ALU shares are exchanged, but less than 95% are exchanged ALU shares could be delisted following the consummation of the voluntary exchange offer.”
I see you have a credibility problem because that’s not what’s been stated. The prospectus states that a delisting can occur only after “90%” ownership is achieved by NOK or if the “squeeze out” condition has been met which will be at 95% ownership as stated in NOK website.
From the prospectus,
“A delisting from Euronext Paris may occur in accordance with the Euronext Paris rules if Nokia (i) completes the squeeze-out or (ii) holds at least 90% of the voting rights of Alcatel Lucent following a simplified public offer and over the last 12 months before the delisting application the total value of Alcatel Lucent Shares traded on Euronext Paris represents less than 0.5% of Alcatel Lucent’s market capitalization.”
Furthermore, the following statement seems to indicate NOK will be making a subsequent offer (NEW) after the 50% target is reached but before the 95% threshold in order to eliminate remaining holdouts and before commencing any squeeze out.
“According to Article 232-4 of the AMF General Regulation, if the Exchange Offer is successful and if Nokia holds less than 95% of the share capital and voting rights of Alcatel Lucent, the subsequent offering period will commence in connection with the French Offer within ten French trading days following the publication of the results of the French Offer (taking into account the results of the U.S. Offer) by the AMF, for a period of at least ten French trading days. Prior to the commencement of the subsequent offering period, the AMF will publish a reopening notice.”
"The 50% exchange rate will be reached by the large institutional holders."
Institutions own 50%, really?
According to CNBC, the 263 institutions (Barclay, Alpine,Carlson, AQR, Fidelity, etc.) own less than 4% of ALU outstanding shares combined at a total of 105.2M shares. How do you brazenly arrived at a 50% (1.4B shares) figure?
"Nokia is not going to pay the holdouts more for their shares for a company they already own."
Then, why does NOK need to initiate a "squeeze out"at all?
More importantly, why does the "squeeze out" occurring only after 95% ownership, and not at 50%? This suggest to me that NOK will make a second offer to close the gap after its 50% ownership before initiating the "squeeze out" at 95%.
I think you need to answer these questions before your integrity becomes questionable.
"Again, then why wouldn't people be buying up shares of ALU right now to ensure they get this squeeze out price?"
Because, there is no guarantee that this deal will be approved by ALU shareholders. If the deal gets rejected there won't be any squeeze out required, so why should anyone take the risk and pay higher price now when the floor is already set? This definitely gives advantage to ALU shareholders to be holdouts because the floor is already been set.
[If this was true, wouldn't the going rate for ALU be 4.35$?]
Here is what I know:
"As long as the exchange rate is set so that the value in the acquirer’s stock EXCEEDS the pre-merger market value of the target-company stock, the non-tendering shareholders will receive fair value for their shares and will have no legal recourse."
Nokia made the offer on April 15, 2015 based on the pre-merger market closing price of April 13, 2015. The closing price on April 13, 2015 for ALU was $4.35 (EUR 4.08).
"Offer value based on Nokia's unaffected closing share price as of April 13, 2015 of EUR 7.77 and offer exchange ratio of 0.550x, resulting in an implied offer price of EUR 4.27 per share." -NOK website
This means NOK will need to pay anywhere between EUR 4.08 ($4.35) and EUR 4.27 ($4.55) on "squeeze out" cash payment to those holdouts.
In my opinion.
I think you are wrong about that.
NOK has specifically stated in their website that "Subject to Nokia acquiring at least 95% of the share capital ... Nokia intends to commence a squeeze-out" against the remaining holdouts (that's the remaining 5%).
Have you noticed there is a gap between 50% and 95%? We know for the fact based on what NOK has stated in their website that any holdouts beyond 95% will get squeeze out (meaning cash payment) of about $4.35 which is same as the original offer but "IN CASH" under the term "squeeze out".
The financial term of "squeeze out" is stated as,
"Squeeze out or freeze-out is a term referring to the compulsory acquisition of the stakes of a small group of shareholders from a joint-stock company by means of CASH compensation. They force the minority stockholders in the original corporation to accept a cash payment for their shares, effectively "freezing them out" of the resulting company. As long as the exchange rate is set so that the value in the acquirer’s stock EXCEEDS the pre-merger market value of the target-company stock, the non-tendering shareholders will receive fair value for their shares and will have no legal recourse."
So, that leaves those holdouts of between 50% to 95%, otherwise NOK would have stated that "Subject to Nokia acquiring at least 50% of the share capital and voting rights of Alcatel-Lucent, Nokia intends to commence a squeeze-out", right? This tells me that NOK would have to make a revised offer for those between 50% to 95% to close the gap for the squeeze out of beyond 95%.
In my opinion.
"Subject to Nokia acquiring at least ninety-five percent of the share capital and voting rights of Alcatel-Lucent, Nokia intends to commence a squeeze-out procedure of the remaining outstanding Alcatel-Lucent shares." -(NOK website)
This statement strongly suggests to me that those who have "ACCEPTED" the Tender Offers (50% and greater) will receive only the 0.55 exchange ratio.
However, those who have "REJECTED" the original Tender Offers (BETWEEN 5% TO 50%) will get a second offer that will be a much higher than the original 0.55 exchange. This is the second offering by NOK to further close the gap.
On the third round (between 0% to 5%) NOK intends to squeeze them out as stated.
Those who have accepted the original Tender Offers will not receive the revised difference because they have already accepted their offer, which mean they are stuck with 0.55 exchange. It will cost less for NOK to "pay more" to only those who are holding out.
The smart money is NOT to accept the offer.
What is the downside? ... There is none!
The worst case scenario is the deal goes through for everyone and that doesn't mean your shares would suddenly become worthless just because you have declined the offer.
At this stage of the merger where NOK has already received all the regulatory approvals and the presumed acceptance from their own shareholders they will rather pay a little more to seal the acquisition than walking away given the declining trend in wireless market and the strategic partnership of Ericsson and Cisco.
Therefore, the smart money is to REJECT the offer.
Think about it!
You must be a real nincompoop not realizing that NOK will pay a much higher price at this point to seal this deal simply because NOK can't afford "not to" given the announcement of Cisco/ERIC's strategic direction. If you believe in what ALU is truly worth then you should be holding out for more given the recent market reconfiguration.
I'm surprised to hear that you have the money to buy more shares. Most people do not have the money to buy any stock let alone more shares than they already have.
I wouldn't be so certain. Cisco has a partnership with Qualcomm in designing wireless chip for office buildings. Meanwhile, Qual has a $8B business in China and flourishing. Do you think the NDRC (regulator) would allow Qualcomm (US firm) to operate freely in China and supplying wireless chip technologies into their network especially those developed with Cisco? The answer is "yes" because despite everything the "Internet of Things" is already here and China wants to be part of it.
The mobile wireless market (4G) is rapidly declining and the only ones left are those from developing countries but expected to decline as well due to US rate hikes. The 5G won't be widely adopted for another 7 years because of investment gaps in carriers. Recently, ERIC has given lower guidance on declining wireless markets and this affects every one especially NOK since reportedly 90% of NOK's revenue is coming from Network.
The Internet of Things, in the interim, will reuse the existing wireless infrastructure (4G, 802.11, etc.) with SDR and SDN/Virtualizations (eg. Cisco, ALU) during transition to 5G. What this means is that it's vitally important for NOK to successfully acquire ALU even if NOK will have to pay more than originally agreed because NOK simply cannot afford "not" to at this point.
At the end of the day, despite regulators and management's quick approval ALU shareholders will still hold the key to accept or reject the Tender Offers. I think it's reasonable to assume that ALU shareholders realize they possess the upper hand in this merger and will likely reject the Tender Offers unless NOK is willing to sweeten it up.
That's right, 65% refers to non-Wireless. After all, the subject is about Wireless markets geting hit.
"They push the stock down to get the weak to sell so that the bigger investors can buy on the low."
It's sad to see that there are so many here that have no idea what they're investing in and yet believing they are great investors and being manipulated. This is all about macro play. Wireless players such as (ERIC:-5.7%, NOK:-3.1%, ALU:-3.0%) are being disproportionally affected because of their heavy dependency on the developing markets due to LTE saturation in the West.
There will be expected capital flights from developing markets where investors will be leaving in droves chasing after higher yields in the US while draining capital investments from the developing economies, meaning there goes the "wireless markets".
This is what I've been saying that it's bad idea to merge with a company like NOK where reportedly 90% of its revenue is depended on the wireless market. ALU is down mainly because of being dragged down by NOK. Keeping in mind that ALU has 65% of it revenue coming from IP and other Platforms so ALU would have been faring better given that Juniper is up today and CSCO is down only slightly.
I agree with the article.
The article states that NOK's revenue has declined by -2% which is exactly what I have said that fundamentals and trend (anemic Wireless markets) are implying dead money for NOK. However, if there is a merger dead money will be applied to both, even though ALU has a +7% revenue growth but now needed to shoulder NOK's dead weight, in my view.
Furthermore, it is logical to assume that NOK gained contracts in China mainly because China was expecting the two to merge thereby forwarding contracts to the acquirer. Nevertheless, China is still expecting to be equipped with ALU's technology (eg. small cells) even after the merger. This means China has given the same contracts that were originally destined for ALU but now have been forwarded to NOK with a caveat of no net gain to both.
After the merger, the irony is that the current ALU's revenue will be supporting both companies but with double the head counts. This means the new company (NOK) will be struggling initially and no one knows for how long until massive job cuts are taken with more future re-orgs (imo). But, if the merger doesn't take place then NOK will struggle alone while ALU will stay unchanged given that ALU is currently deriving only 34% of its revenue from Wireless (smaller hit) and perhaps even flourishing from its ever growing other non-Wireless businesses that help to accelerate toward its positive cash-flow target at year end.
In my humble opinion.
"But unless someone digs up Clarence Darrow and props his body in front of a lectern to argue further, this deal is done"
When large shareholders and hedge funds realize that at this point NOK will pay whatever it takes to acquire ALU because of so much work was put into it your so-called "done deal" will be DEAD. Just wait and see. Remember, NOK needs ALU more than anything.
My humble opinion.
Delusional? Not at all.
I actually think Dig is quite right that 1:1 is more than fair since quarter after quarter ALU has been performing much better than NOK in the revenue front.
In Q3, ALU has a +7% increase in its YoY revenue at $3.4B while NOK has a -2% loss YoY revenue at $3.0B. Anyone in Wall Street will tell you that the most important thing is the revenue front and not the earnings. Because, you can always generate higher earnings through extreme austerities but you cannot generate higher revenue through cost cutting. Besides, ALU is about to become cash-flow positive permanently in just matter of weeks.
Sure, ALU has $5.9B debt but ALU also has $6B cash on-hand which many consider "net cash" as not an important financial indicator. For example, AT&T currently has $6.2B cash on-hand but also has $119B debt and yet AT&T is operating with a strong market confidence.
Keep in mind that NOK is in desperate need of ALU's businesses and here is why,
" LTE market to peak in 2015
In the mobile infrastructure market, the third quarter of 2014 was almost a carbon copy of last quarter, and we are now reaching the peak of plain LTE rollouts"
After a carrier deployed its wireless infrastructure its capital spending on wireless will drop significantly since the only requirement will be with periodic maintenance. However, the same carrier will now shift its capital spending towards network capacity such as "switches and core routers" where NOK lacks.
ALU has been progressively performing better in the last 18 months with now 65% of its revenue coming from non-Wireless businesses and its balance sheet is also getting stronger in every quarter. In fact, ALU has enough cash in Q3 to actually reduce its long term debt by EU 300M before the maturity date (2020).
In Q3, ALU has reported that they are ahead of schedule for being cash-flow positive by year-end 2015, which is 1 whole year ahead of Shift Plan. Remember, at this point, NOK will pay whatever it takes to own ALU because they can't afford not to. It has been reported that NOK derives 90% of its revenue from Network business (mainly Wireless).
In summary, as an ALU shareholder I cannot see any negatives with "rejecting" the Tender Offers given that ALU Shift Plan is already 90% completed and off to a profitable future. Keep in mind that if ALU is a failing entity that needs rescue from NOK (as painted by NOK's trolls here) do you really think NOK management would be so enthusiastic about ALU? On the other hand, if ALU is truly a FAILING company without hope then I'll be the first one to promote the Tender Offers. But, after almost 10 years, ALU is now for the first time getting out of the rut so don't let these vultures steal your money.
In my humble opinion.
"Holdouts get squeezed out." (Really?)
That happens only if NOK owns 95% of ALU shares which will be highly unlikely.
"Subject to Nokia acquiring at least ninety-five percent of the share capital and voting rights of Alcatel-Lucent, Nokia intends to commence a squeeze-out procedure of the remaining outstanding Alcatel-Lucent shares." -NOK