Mergers & acquisitions

Rumor Mill Boosts AlcaLu

The late August heat appears to have warmed up the telecom equipment sector rumor cauldron, with Alcatel-Lucent (NYSE: ALU) at the heart of the speculation.

According to this Reuters report, there's talk in the stock trading community that an unidentified Chinese company might bid for Alcatel-Lucent.

Even in telecom vendor fantasy land, only two Chinese companies -- Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) -- could even contemplate a bid for AlcaLu, and it's hard to imagine that any potential move would get further than first base.

Just for fun, though, imagine that Alcatel-Lucent and Huawei did tie the knot -- to form Hualcalu, of course. Harking back to 2008's full year revenues, such a combination would create the world's biggest telecom systems supplier. (Check out our vendor rankings table in this story: Huawei Closes In on Rivals.)

Extraordinary though the suggestion might be, it helped, along with an upgrade on the stock by analysts at French equities research house Natixis, to give AlcaLu's share price a 12.8 percent boost to €2.78 (US$3.95) on the Paris bourse. If it ends the day at that mark, that'll be its highest closing price of 2009.

A price of €2.78 gives AlcaLu, which recently reported revenues of €7.5 billion ($10.67 billion) for the first half of the year, a market capitalization of €6.44 billion ($9.16 billion). (See AlcaLu CEO Pitches Recovery Story.)

It's worth noting at this point that AlcaLu's share price has sunk as low as €0.87 this year. But with general economic trends turning more positive, and carriers expected to spend the lion's share of their annual capex during the second half of the year, it's likely that AlcaLu's shareholders can expect their holdings to increase in value between now and 2010.

But talk of Chinese interest in Alcatel-Lucent isn't the only M&A talk involving the vendor giant. One equities trading house believes AlcaLu should consider merging with Nokia Networks , according to this Reuters story, a suggestion that would no doubt excite the giant dealmakers that would need to broker such a deal, but send many others to the bar for a treble measure of something lethally strong.

Alcatel-Lucent, as you'd imagine, isn't commenting on the speculation.

All other suggestions for head-turning M&A combinations are most welcome on the message boards below -- the more laughs the merrier!

— Ray Le Maistre, International News Editor, Light Reading

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