Investor Alert

Feb. 16, 2004, 3:27 p.m. EST

AT&T board meets to consider bids

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By Emily Church and Jenny Spitz, CBS.MarketWatch.com

LONDON (CBS.MW) - AT&T Wireless called a board meeting Monday to consider supporting a buyout offer that could value the company at more than $38 billion, according to reports citing people familiar with the talks.

Meanwhile, Vodafone Group shares closed down 2.6 percent in London trading as concerns mounted that the wireless operator is locked in a bidding battle to take over the U.S. company.

Vodafone /zigman2/quotes/202862751/composite VOD -0.86% continued to maintain radio silence on numerous reports that it submitted a bid Friday to buy U.S. operator AT&T Wireless for around $35 billion, or about $13 a share.

Separately, the Wall Street Journal reported Monday that Vodafone and Cingular Wireless may have upped their offers Sunday from about $35 billion to around $38 billion, driving the bids close to $14 a share.

It was not clear Monday whether Vodafone already submitted a second, higher bid. AFX, citing a source, said Cingular raised its bid to the $38 billion mark, but that AT&T Wireless asked both companies to return with better bids by the end of Monday.

"The ball is now back in Vodafone's court," the source told AFX.

Vodafone /zigman2/quotes/202484985/delayed UK:VOD -0.89% dropped as much as 5.99 pence, or 4.4 percent, to 130.01p before recovering somewhat to finish the session at 132.50p. More than 417 million shares traded hands by day's end, compared with a daily average of 320 million.

AT&T Wireless put itself up for sale last month after receiving an offer from Cingular, which is owned by SBC Communications and BellSouth

Because the bids made by the companies' Friday deadline were roughly similar, AT&T Wireless's advisers asked bidders to submit second-round offers Sunday, the Journal said in its online edition.

NTT DoCoMo and Nextel Communications reportedly bowed out as the asking price for AT&T Wireless escalated. See full story.

Analysts scorn possible deal

Beyond confirming Feb. 6 that it may pursue a deal with AT&T Wireless, Vodafone has declined to comment on its U.S. strategy.

In the meantime, institutional shareholders in London have gone from expecting Vodafone is interested only in looking at the books to worrying that the company, under new American Chief Executive Arun Sarin, is ready to make an expensive U.S. deal that will eat into Vodafone's earnings.

Vodafone's shares are down close to 12 percent from their 2004 high on Jan. 14, with the decline gaining traction as reports of an AT&T Wireless deal circulate.

Analysts, for the most part, have been critical of a deal. Citigroup Smith Barney Monday downgraded Vodafone to a hold on the reports that Vodafone bid over $12 a share to takeover AT&T Wireless.

"We believe buying AWE destroys value and means absolute downside for the shares," the broker told clients. "The stock is likely to decline to 110p to 115p a share on a 12-month view," it said.

Sanford Berstein argued Monday that the $19.3 billion drop in Vodafone's market value since Jan. 14 implies that the stock has priced in a bid for AT&T Wireless of as much as $15 a share.

"Emotion could move the stock severely - in the short-term - if Vodafone pushes on with the auction bidding for AWE and management credibility is questioned," the broker told clients. "However, valuation analysis suggests that the stock reflects an acquisition at current levels."

Cingular is widely viewed as the company with the most to gain by acquiring AT&T Wireless. If the companies combined their networks, according to some experts, the two could save $2 billion a year within a few years of the deal's completion.

Separately, Vodafone would have to sell its 44 percent stake in Verizon Wireless in order to acquire AT&T Wireless.

US : U.S.: Nasdaq
$ 14.90
-0.13 -0.86%
Volume: 8.22M
Dec. 7, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$40.74 billion
Rev. per Employee
UK : U.K.: London
111.88 p
-1.00 -0.89%
Volume: 73.83M
Dec. 7, 2021 4:35p
P/E Ratio
Dividend Yield
Market Cap
£30.78 billion
Rev. per Employee

Emily Church is London bureau chief of CBS.MarketWatch.com. Jenny Spitz is headline editor for CBS.MarketWatch.com in San Francisco.

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