Table of Contents
Introduction Description of the Merger Flow-Back Analysis CGG-Veritas Acquisition Sanofi-Aventis Merger Why use DRs ? Conclusion 2 3 7 8 9 10 10 Large and complex merger and acquisition transactions are critical events for a number of parties: the Board of Directors of the acquirer and the target companies;shareholders of the respective transacting companies; and other market participants looking to optimize economic benefits from the transaction. The Depositary Receipt (DR) Division at The Bank of New York Mellon has a dedicated Global Corporate Actions Team (GCAT) that processes all corporate actions on behalf of our DR clients. GCAT approaches each corporate action with a perspective that goes beyondflawless execution of the transaction to working with clients to analyze the strategic aspects and impacts of the transaction on their DR program. We are pleased to present a detailed case study which examines certain characteristics of merger and acquisition transactions where DRs are used by the acquiring company as acquisition currency. We undertake a granular analysis of the impact that across-border transaction has during the merger period, and after, on DR trading volume, supply/demand preferences for DRs, impact on the stock price in the U.S. and local market. We also offer insights into factors that affect the reactions of institutional investors to the transaction. We intend the case study to be of benefit to financial and investor relations professionals of DR clients who haveresponsibility for structuring, executing, and monitoring the impact of merger and acquisition transactions.
Michael Finck Managing Director The Bank of New York Mellon Email: Michael.Finck@bnymellon.com Phone: +1 212 815 2190 1
On November 30 2006, Alcatel and Lucent Technologies (“Lucent”), respectively French and U.S. communication solution providers, announcedthe completion of their $11 billion merger transaction (the “Merger”), forming one of the world’s leading communication solutions providers. In connection with the Merger, the newly formed French company Alcatel-Lucent issued approximately 878 million DRs to the former holders of Lucent common stock. Each outstanding share of Lucent common stock was converted into 0.1952 of an Alcatel-Lucent DRwith each DR representing one ordinary share. The Bank of New York Mellon was ideally suited to assist these world-renowned companies with their Merger. The Bank has been Alcatel’s depositary since 1997 and acted as Lucent Technologies’ transfer agent since 1996. In this transaction, the Bank acted as an exchange agent for the mandatory exchange of Lucent stock and provided Lucent shareholders withnew Alcatel-Lucent DRs.
Alcatel-Lucent : 878 million DRs Issued
DRs Outstanding 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 Oct- Nov- Dec- Jan- Feb- M ar- Apr- M ay- Jun- Jul- Aug- Sep- Oct- Nov06 06 06 07 07 07 07 07 07 07 07 07 07 07 DR M arket Cap. (U.S. $) $16,000,000,000 $14,000,000,000 $12,000,000,000 $10,000,000,000 $8,000,000,000 $6,000,000,000$4,000,000,000 $2,000,000,000 $0
Source: The Bank of New York Mellon, ADR Inform
The Alcatel-Lucent Merger was one of the largest DR corporate actions handled by The Bank of New York Mellon DR Division. The transaction was atypical in terms of the number of DRs issued, the number of registered holders, and the flow-back reaction. The first part of this case study illustrates the followings aspects ofthe AlcatelLucent Merger: • • • • • • the number of DRs issued the impact on liquidity the impact on stock price the flow-back and DR Ownership the Direct Registration System implementation (DRS) the changes in ownership
The second part of this study provides an analysis explaining the varying reactions of the market following a merger or acquisition and compares the Alcatel-Lucent...