Alcatel-Lucent (ALU) Stock Declines After Activist Hedge Fund Builds 1.3% Stake

NEW YORK (TheStreet) -- Alcatel-Lucent (ALU) shares are down 3.15% to $3.69 in early market trading on Monday after activist hedge fund Elliott Management disclosed a 1.3% stake in the company over the weekend.

The move comes weeks after the French telecom equipment manufacturer agreed to be purchased by Nokia (NOK) for $16.6 billion.

That merger was approved despite objections from London-based hedge fund Odey Asset Management, which is Alcatel's second largest investor, saying that the purchase price was to low.

Elliott Management has a history of building stakes in companies that are in the process of being acquired and then asking for a higher price to be paid by the bidder, according to the Financial Times.

The takeover agreement between Nokia and Alcatel would be difficult to derail because only Nokia shareholders will be given a vote on whether to proceed with the acquisition, the Times noted. 

Both companies already approved the terms of the transaction and hope to close the deal in the first half of 2016.

TheStreet Ratings team rates ALCATEL-LUCENT as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALCATEL-LUCENT (ALU) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

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