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News > Deals
Agere slashes IPO range
March 22, 2001: 11:32 a.m. ET

Lucent microelectronics unit to sell 600M shares at $6-$7, price next week
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NEW YORK (CNNfn) - Agere Systems Inc. cuts its price range in half Thursday and will price the IPO next week, underwriters said.

Agere, the microelectronics unit of Lucent Technology (LU: Research, Estimates), raised the number of shares it plans to sell to 600 million from 500 million but cut the price range to $6 to $7 from $12 to $14 each, via lead underwriter Morgan Stanley Dean Witter.

The IPO likely will price either next Wednesday or Thursday, the underwriter said.

Thursday's revision is the third for the issue. The last time, in February, Agere revised its planned offering and said it expected to sell 500 million shares at $12 to $14 each via Morgan Stanley Dean Witter.

graphicAllentown, Pa.-based Agere designs and makes optoelectronic components for communications networks and integrated circuits for computer equipment, and is a leader in sales of communications semiconductors.

Agere still plans to trade under the New York Stock Exchange symbol "AGR.A."

Under its old terms, the Agere IPO could have raised as much as $7 billion, ranking it as the largest U.S.-based IPO since AT&T Wireless Group's (AWE: Research, Estimates) $10.6 billion offering last year. Now the Agere deal will raise at most $4.2 billion, making it the fourth-largest U.S. based offering, behind the $4.4 billion deal from Conoco Inc. (COC: Research, Estimates) but ahead of Goldman Sachs' (GS: Research, Estimates) $3.7 billion issue.

Some have speculated that the poor IPO market, which has seen only about 20 deals priced this year, may cause Lucent to scrap the Agere IPO.

"This deal will very definitely get done," said John Fitzgibbon, editor of WFNusa.com. "The selling shareholders have just stepped out of the picture."

Agere's cut in price range reflects the change in the IPO market where deals are now being reduced to get sold. "It's a buyers' market now," he said.

Morgan gets green shoe

The new terms also illustrate other changes. Agere will be selling all 600 million shares while the underwriter will be selling none.

Under the previous terms, underwriter Morgan Stanley would have sold 200 million Agere shares in the IPO in exchange for $2.5 billion of Lucent it held. Now, Morgan will not be selling those shares but has received a "green shoe option" whereby it can buy and then sell 90 million Agere shares, after the IPO, in exchange for some Lucent debt.

Murray Hill, N.J.-based Lucent is under pressure to pay off a heavy debt load that will compel it to launch the Agere IPO despite the poor market, analysts have said.

Lucent had $8.1 billion debt outstanding as of Dec. 31, the company said in the SEC filing. If Morgan were to exercise the over-allotment option it would reduce the Lucent debt it holds by about $565 million. Morgan now owns only about $1.6 billion in Lucent debt, Agere said in the filing.

Parent firm Lucent will be spinning out the unit after the IPO and Agere no longer will be a wholly owned subsidiary. Lucent plans to distribute all the shares it owns to shareholders by Sept. 30. After the IPO, Lucent will hold 63.3 percent Class B shares and 87.3 percent of voting power.

Lucent also still plans to transfer $2.5 billion debt to Agere. Under the prior terms, the Morgan share exchange would have covered the debt. Now Lucent expects to generate an additional $2.5 billion by Sept. 30 and may accomplish through "a number of transactions" such a private placement of Lucent stock and asset sales, including the sale of its optical fiber business. On March 14, Lucent announced that it is considering selling its optical fiber solutions business, which could fetch up to $10 billion.

The delay and changes to the Agere IPO were widely expected. On Monday, CNNfn.com first reported that Agere would change its terms this week and postpone its pricing until next week.

Lucent shares fell 80 cents to $10.60 Thursday in midday trading. graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.