Word: mergers
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...What's an Alcatel?" that's the question investors across the U.S. might have been asking last week after it emerged that the comparatively low-profile French telecom-equipment giant was in merger talks with erstwhile Wall Street heartthrob Lucent Technologies...
...company has lost an astonishing $200 billion in shareholder value in the last year and a half.) Alcatel's investors were just as unhappy, and perhaps with greater justification. Alcatel has problems of its own: its stock is down around 65% from its high last year - and a merger with Lucent would reap some $2 billion in short-term debt...
...that will not only force United investors who are forbidden to own junk bonds to dump the stock but also raise borrowing costs for the company. And just a few hours later, the Attorney General of Minnesota, Mike Hatch, announced he would fight the United-US Airways merger even before it's complete. Hatch said, on behalf of the state, he would sue the airlines if the merger is approved by regulators. "We should not be permitting that type of concentration in such an important industry," said Hatch...
...write the merger off completely. United is a savvy airline that can adapt (the last bit of evidence being the formation of a business jet unit aimed at its most valuable passengers). And United's executives have no doubt closely read the decision last month by a federal judge that threw out the first-ever Department of Justice suit against a major airline for predatory practices - against United rival American Airlines for unfairly driving competitors out of business...
...ruling means the big airlines have new license to throw their weight around, and the bigger the airline, the heavier the weight. United, which is now the second-largest carrier (American's purchase of TWA made it top dog), could make whatever concessions the DOJ demands to make the merger fly, and then - considering the safety net of the judge's ruling for American - swoop back in after the deal closes and drive smaller rivals out with the kind of pricing hardball American has now officially gotten away with...