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Deals from Hell by Arthur Levitt Jr., Robert F. Bruner

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8
September 1991: The Acquisition of NCR Corporation by AT&T Corporation

AT&T: COLLECT CALL

After a bruising hostile takeover fight, Robert Allen, CEO of American Telephone & Telegraph (AT&T) Corporation, and Charles Exley, CEO of National Cash Register (NCR) Corporation, announced in May 1991 an agreement for AT&T to acquire NCR for $7.48 billion.1 This represented a 132 percent premium over NCR’s market value prevailing at the end of October 1990, shortly before AT&T commenced a hostile tender offer for NCR. By May, the two men were buoyant.Then and earlier, Allen had said that the merger would “create an enduring American institution with the technological, financial and marketing strength to succeed against foreign competition in the emerging global information market,”2 and “will be uniquely equipped to meet what customers will need in the future.”3 “I am absolutely confident that together AT&T and NCR will achieve a level of growth and success that we could not achieve separately. Ours will be a future of promises fulfilled.”4
Five years later, in May 1995, AT&T announced that it would spin off NCR leaving an entity with a market capitalization of $3.4 billion, about a fourth of the value of AT&T’s total investment in the computer segment. The press was remorseless: “Fiasco . . . a lesson in just about everything that can go wrong . . . one of the biggest flops in the computer industry,”5 and an “unmitigated disaster for all concerned.”6 Reflecting on the experience, ...

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