The Other 10 Worst Big Mergers of the Past 10 Years

Advanced Micro Devices Inc. (NYSE: AMD) is a train that has jumped off the tracks. Poor leadership and being outpaced by Intel Corp. (NASDAQ: INTC) at every step has been painful. Acquiring graphics chip maker ATI did nothing for AMD, and the company has been in a steady state of leadership change and decline almost ever since. The purchase price was a whopping $5.4 billion back in 2006, but there were immediately talks that AMD really wanted to acquire ATI rival NVIDIA Corp. (NASDAQ: NVDA). AMD shares were around $20 in mid-2006, and they are now under $2.00. Sadly, AMD’s market value is only about $1.3 billion to boot. AMD has been unable to win in processors from its own business, nor has its graphics chip business retaken its old power. With no real CEO today, with AMD’s current value being a fraction of what it paid for ATI and with a share price performance that is pathetic, is there any way that anyone at AMD can argue that this was a good merger?

Alcatel-Lucent S.A. (NYSE: ALU) has been a total disaster of a merger. France’s Alcatel acquired Lucent, and things have just slid lower and lower. If the company wants to deny this, we would merely point out that the stock is now under $1.00, and things are so bad that we recently included it as a likely member of our “future penny stocks” for investors. Merging Alcatel and Lucent was supposed to create a technology and networking gear supermarket for telecom providers, governments and other major enterprisewide communication clients. Now the company has fired and fired and restructured and restructured into a focus on what looks like Next-Gen equipment. We’ll see. We might sarcastically wonder if Next-Gen is already on the way out if Alcatel-Lucent wants to focus on it. Neither Alcatel’s Serge Tchuruk nor Lucent’s Pat Russo could dominate the competition at the start of this odd-ball merger, and no one has been able to since. Shares are down about 90% since the merger, and this combined entity did not even capitalize off of its massive Bell Labs patent portfolio, which was deemed to be worth billions at the time of the merger.

Alpha Natural Resources Inc. (NYSE: ANR) announced its plan to buy Massey Energy at the end of January of 2011. Massey was a troubled asset after its mine disaster killed 29 workers in 2010. The deal was a cash and stock buyout, which ultimately was worth some $8.5 billion combined when it was announced. This merger gave Alpha 54% of the company and Massey 46% of the company. Apparently the diversification of operations in metallurgical coal and the move to become the number two coal company in America did not protect the company from the anti-coal movement around the nation. With a second term of President Obama, the merger may have little to no value ahead. The Alpha Natural Resources share price was above $50 when this deal was announced. Shares are down to around $7 now, and the company is expected to lose money in 2012 and in 2013 with sales expected to decline almost 20% next year. The company took goodwill impairment and asset impairment and restructuring charges of $1.5 billion and $1.0 billion, respectively, earlier in 2012. With a value of about $1.6 billion today, can this company claim that the merger really did anything other than help assure that it will not have to pay income tax for years?

Bank of America Corp. (NYSE: BAC) may have won when it acquired Merrill Lynch, but by acquiring Countrywide it shot itself in the foot. This awful Countrywide buyout is a merger that we still maintain was coerced rather than 100% voluntary, but either way this destroyed Bank of America, relative to peers like Wells Fargo & Co. (NYSE: WFC) and J.P. Morgan Chase & Co. (NYSE: JPM). Bank of America is now assured to have untold exposure to the mortgage mess from before, during and after the last recession for years and years. Most of the securities suits tied to improper mortgages are tied directly to or generally overlap with that Countrywide purchase. Angelo Mozilo is now considered one of the men that caused the Great Recession for endless lending to homebuyers out in California and other markets that reached unsustainable prices, financed by very questionable mortgages. Ken Lewis could have found a much cheaper way for Bank of America shareholders to find out about world-class sun tans other than by signing on with Angelo Mozilo. There were many bad mergers in high finance, but the Countrywide-Bank of America merger was a marriage brokered in hell. Brian Moynihan has promised no more large acquisitions, but Bank of America’s prominence now lags Chase and Wells Fargo.

Boston Scientific Corp. (NYSE: BSX) paid more than $27 billion to acquire Guidant in 2006. This was supposed to be the end-all, be-all deal for the company. They even had to pay Johnson & Johnson (NYSE: JNJ) money to break up a prior merger offer after a serious bidding war. After years of mismanagement, management shake-ups, product follies and restructurings, all that Boston Scientific has to show for the huge undertaking is a group of very unhappy and depressed shareholders. This stock was $35 at the start of 2005 and its peak was around $45 shortly before that. Its shares slid long before the Great Recession to less than $15 in 2008 as the problems were mounting. Now Boston Scientific is close to a $5 stock with only a $7.2 billion market value, and it carries more debt than it has in physical assets. It has written down billions and billions worth of goodwill and intangibles, and it remains a mystery how this company can rekindle any interest as there as sales peaked in prior years and are now on the decline. Guidant was a vanity acquisition which was supposed to generate double-digit sales growth. The only annualized double-digit growth has been realized by short sellers here.