Elliott, the activist hedge fund headed by Paul Singer acquired a stake in Alcatel-Lucent, the French telecommunications company, prior to the completion of its merger with Nokia.
Based on a regulatory disclosure with the Financial Markets Authority in France, Elliott owns 1.3% of Alcatel-Lucent. The activist hedge fund built its stake in the company using equity swaps, a derivatives contract that allows an investor to gain economic exposure to a share without direct ownership.
Last April, Alcatel-Lucent, and Nokia announced their merger agreement to create an innovative leader in next-generation technology and services for an IP-connected world.
Nokia offered to acquire all of the equities issued by Alcatel-Lucent in France and The United States in an all-stock transaction. The deal values Alcatel0Lucent at approximately €15.6 billion on a fully diluted basis. The Finnish telecommunications company is offering 0.55 of a new Nokia share for every Alcatel-Lucent share.
Elliott builds stake in Alcatel-Lucent after Odey criticized the terms of Nokia merger
The Financial Times noted that Elliot built its stake in Alcatel-Lucent after Odey Asset Management criticized the terms of the transaction offered by Nokia. According to Odey, the Finnish technology company’s offer to acquire all of the shares of Alcatel-Lucent was “unacceptable” and called described the deal as a “dressed up takeover.” Odey is the second largest shareholder of Alcatel-Lucent.
Elliott declined to comment on its intention in building a stake in Alcatel-Lucent. The activist hedge fund has a history of investing in companies that are candidates for takeover. Elliott normally demands a higher acquisition price from the bidder.
According to the Financial Times, it would be difficult to disrupt the merger between Alcatel-Lucent and Nokia because only 50% of the shares of the French telecommunications company are required to be tendered for sale. Nokia shareholders are only required to vote for the approval of the transaction.
France already gave its blessing to the transaction in exchange for some guarantees that some of the businesses operations of Alcatel-Lucent will remain in the country.
U.S. regulators already approved the deal. The companies are still waiting for the approval from European antitrust authorities, which is expected to make a decision next month.
Elliott did not contact Alcatel-Lucent regarding its investment
Elliott did not contact the management of Alcatel-Lucent regarding its intention related to its investment in the company, according to a person familiar with the matter.
The person suggested the possibility that Elliott is seeking to make a profit by acquiring a stake in Alcatel-Lucent while selling Nokia shares. Elliott could benefit from any changes in the stock price of the company.
On the other hand, an analyst commented any investor would not make a significant profit on such move since Alcatel-Lucent and Nokia already agreed to the terms of the deal. The analyst suggested that Elliott may need to find a strategy to make Alcatel’s stock price higher than Nokia.
Elliott is currently engaged in a campaign against the merger of Samsung C&T with Cheil Industries. The activist investor believed that the deal is “unfair and unlawful.”