Why Elliott Buys Stake in Alcatel-Lucent as Nokia Works to Complete Deal

NEW YORK (The Deal) -- Paul Singer's Elliott Management has acquired a 1.3% stake in Nokia's (NOK) takeover target Alcatel-Lucent SA (ALU) as the New York hedge fund manager continues to tap into ongoing deals to make money.

Elliott holds the stake indirectly and may be hoping to benefit from a sweetened offer or from future lawsuits.

Elliott didn't respond to a request for comment about its stake purchase, which comes after Odey Asset Management  criticized Nokia's offer as too low. Odey, which owns 5.3% of Alcatel-Lucent shares, said Nokia and Alcatel are selling the deal as a merger when it is clearly a takeover that necessitates a bigger premium.

Nokia on April 15 announced an agreement to buy Alcatel-Lucent that had the backing of not only the target's board but also, crucially, the French government. Analysts have said that the government's backing is likely to ensure the deal succeeds, even though the value of the all-share approach has fallen 19.8% since it was announced.

The Finnish suitor would pay 0.55 for a new share for Alcatel, valuing the offer at €12.5 billion ($13.9 billion). Nokia and Alcatel-Lucent hope their marriage will allow them to take on network equipment heavyweights Ericsson AB, of Sweden, and China's Huawei Technologies.

Elliott is now a regular in high-profile European deals. The hedge fund is suing Kabel Deutschland Holding AG, a German cable company bought by Newbury Park, England-based Vodafone Group in October 2013 for €7.7 billion. Elliott claims Kabel's board acted improperly by agreeing to Vodafone's €84.53 per-share proposal even though its own audit said the company was worth €104 per share.

The New York investor bought 13.5% of Kabel after Vodafone began its overtures.

Elliott has made similar moves in other German deals to line its pockets. Two years ago it prevented San Francisco health care giant McKesson from buying and delisting German drug distributor Celesio AG. McKesson this year was able to buy a majority of Celesio, but only after reaching an agreement with Elliott, which remains invested.

And it's also active in Asia. The investor is suing to stop Samsung C&T's $9 billion-plus takeover by sister company Cheil Industries as well as the related sale of a 5.8% stake in construction company Samsung C&T to building materials supplier KCC. Elliott claims the deal would cost shareholders billions and is illogical.

Shares in both Alcatel-Lucent and Nokia were down sharply in Europe by Monday afternoon in a falling market. At Nokia's current price of €6.24, the offer values Alcatel-Lucent at €3.432, just above its €3.35 price as of Monday.

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