TELECOM Digest OnLine - Sorted: France's Alcatel to Buy Lucent for $13 Bln

France's Alcatel to Buy Lucent for $13 Bln

Kenneth P. Stox (ken@stox.org)
Sun, 02 Apr 2006 17:56:08 GMT

By Sudip Kar-Gupta and Michele Gershberg

PARIS/NEW YORK (Reuters) - French telecoms equipment group Alcatel
(CGEP.PA) said on Sunday it had finalized a deal to buy Lucent
Technologies (NYSE:LU - news) for around $13 billion to strengthen its
position in a consolidating market.

The transaction, which will see Alcatel shareholders have the lion's
share of the new company, comes amid a wave of consolidation in the
telecoms industry and will create a company with combined revenues of
around 21 billion euros ($25 billion).

The companies said the deal would result in a 10 percent reduction in
their combined global workforce.

"This is an industry where size and scale matter," Patricia Russo, who
will be chief executive of the new group, said on a conference call.

The Alcatel/Lucent tie-up had been partly complicated by Alcatel's
plans to increase its stake in French defense electronics group Thales
(TCFP.PA) -- a politically sensitive issue that has involved the
German and French governments.

Alcatel said it would continue talks with Thales over possibly
increasing its shareholding in the group. Alcatel now has a stake of
around 9.5 percent in Thales, while the French government holds around
30 percent of Thales.

Alcatel and Lucent said the deal was a "merger of equals."

However, Alcatel shareholders will own around 60 percent of the new
company, with Lucent shareholders owning the rest.

NEGOTIATING POWER

As part of the deal, Lucent shareholders will receive 0.1952 of an ADS
(American Depositary Share) representing ordinary shares of Alcatel
for every common share of Lucent that they currently hold.

This values Alcatel's takeover of Lucent at around $13.4 billion.

Alcatel Chairman and Chief Executive Serge Tchuruk will be
non-executive chairman of the new Paris-headquartered company.

A tie-up between Alcatel and Lucent strengthens the ability of both
companies to negotiate prices with their telephone company customers,
who have led consolidation in the telecoms sector.

Alcatel said it expected its acquisition of Lucent to be accretive to
earnings per share (EPS) in the first year.

The transaction terms were thrashed out with the backdrop of a complex
battle for French company Thales.

Alcatel said it remained keen on increasing its stake in Thales.

Defense industry sources have said Alcatel hopes to fold its satellite
activities into Thales in exchange for a bigger stake in the company.
However, European planemaker EADS is also keen for a stake in Thales.

EADS tried to grab control of Thales in 2004 and media reports said
French President Jacques Chirac and German Chancellor Angela Merkel
backed a three-way deal between EADS, Thales and Alcatel to create a
leading European satellite firm.

Lucent said it would create a separate and independent unit to oversee
its sensitive contracts with the US government.

Retired workers of Lucent had said that the U.S. government should not
approve of the deal with Alcatel, but Lucent said the merger was not
contingent on their approval.

Alcatel shares closed down 1.5 percent at 12.77 euros on Friday, while
Lucent ended down 1.3 percent at $3.05.

Post Followup Article Use your browser's quoting feature to quote article into reply
Go to Next message: Allison Linn: "Microsoft Warns Against Outside Fixes"
Go to Previous message: Mr Joseph Singer: "Different "cultures" For Business Calling"
TELECOM Digest: Home Page