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Alcatel Lucent ADR Delisting Issues

|Includes: NOK, Nokia Corporation (NOK)

Alcatel Lucent (NYSE: ALU) has announced termination of the ADR program and will delist the ADRs from the NYSE on Feb. 24th, 2016. At that point, the ADRs will cease to exist, leaving holders with limited options and uncertainty on what will be received. ALU holders will have 2 options:

1) Convert ADRs to ordinary shares of Alcatel (in France) and receive 0.55 ordinary Nokia shares which trade in Helsinki and France. The conversion would have to be processed before the squeeze-out takes place. In this scenario, ALU holders pay a $0.05 per share cancellation fee of the ADR, plus $20 cable fee, plus any regulatory taxes. The cable fee is a fixed fee independent of the number of ADRs.

or

2) The ADR trustee for ALU (JP Morgan) will sell the underlying ordinary shares of Alcatel and distribute the cash minus brokerage commissions and fees to the ADR holders. It is unclear what the cash amount to be distributed under this option will be and when the distribution will be made. However, the amount will not be tied to the implied value of the exchange ratio of 0.55 Nokia shares.

In addition, the timing of either the squeeze-out or the sale of the underlying shares by the trustee could potentially take a couple months vs days or a week. According to the merger agreement, Nokia has 3 months to execute the squeeze-out. The ADR trustee has 60 days to sell the ordinary shares.

Currently, ALU shares are trading at a premium to 0.55 NOK shares. ALU is trading ~$3.32. NOK is trading ~$5.85. $5.85 x 0.55= $3.2175, basically a 10c premium. Given the uncertainty from the delisting and the potentially high transaction fees, ALU holders who did not tender might be best served by selling ALU now while it trades at a premium to NOK.