Conference nyoss1::market_investing

895.0. "3Com trades 1 Yaz for 2 of Chipcom's Mickey Mantles?" by DELNI::KOPEC () Fri Jul 28 1995 09:55

Hi all you financial moguls out there...

I was just reading the story on the recent 3Com 'acquisition' of Chipcom
and I was wondering if someone could explain exactly what this paragraph 
means.  

>Under terms of the transaction, 3Com will exchange 0.53 shares of its common
>stock for each of Chipcom's 17.53 million shares outstanding. The price values
>the transaction at about $775 million based on yesterday's closing stock
>prices. Following the acquisition, Southborough, Massachusetts-based Chipcom
>would become a division of 3Com.

What is actually happening when companies exchange shares as described?
Let me describe an example of what I would conclude is happening based on 
this paragraph and then someone can correct me...
	1) 3Com felt that each of Chipcom's outstanding shares were worth .53 
	   of 3Com's price per share at the time.
	2) Chipcom had a total of 'Y' shares outstanding at the time
	3) 3Com traded .53Y shares of its stock to Chipcom for Y shares of 
	   Chipcom stock - just like baseball cards right?   ;-)
	4) 3Com says 'we acquired Chipcom' and they are now one of our 
	   divisions.

Is it as simple as this?

						Thx, Stan

    Basically, you are right.  This is a non-cash transaction.
    3COM has many more shares than .53Y, so the shares they give
    Chipcom means that Chipcom stock owners become 3COM owners.
    
    3Com ends up with all Y shares of Chipcom stock, which they
    retire by putting them in a vault or something.  Thus, they have
    "acquired" Chipcom.  There are no more Chipcom stockholders.

	3com was down yesterday due to worries of the stocks dilution

	In case anyone hasn't heard yet, Cabletron does *not* want this
	merger to go through (between 3com & chipcom).  So much so that
	it may buy 50% of Chipcom's stock ....

	Well Cabletron has changed their mind (lack of cash probably really
	doing the talking) and will not be competing for control of Chipcom.
	Cabletron has said they would sell what they own of Chipcom and
	compete head to head against the newly merged 3com/Chipcom.

	3com is buying again.  This time US Robotics (USRX) in a stock
	swap (usrx shareholders will receive 1.75 shares of 3com for
	each share of usrx they hold).

	One analyst said this will help them compete against Cisco (CSCO).