Alcatel, Lucent shareholders back merger

AFP ^ | 09/08/2006

[Republicain]

PARIS (AFP) - Shareholders in French telecommunications equipment maker Alcatel and US group Lucent approved a merger of the two companies to create a giant valued at 21.5 billion euros (27 billion dollars).

The backing came during special general assemblies held by Lucent shareholders in Wilmington, Delaware and Alcatel shareholders in Paris.

Lucent Technologies chairwoman and chief executive, Patricia Russo, who is to be chief executive in the combined entity, said the merger would create a strong global player.

"As we have said from the start, the primary driver of this combination is to create long-term value for shareowners, customers, and employees.

"Today we received approval for the merger from Lucent's shareowners, and as a result, we are another step closer to creating the first truly global communications solutions provider with the broadest wireless, wireline and services portfolio in the industry."

The merger creates a giant valued at 21.5 billion euros (27 billion dollars) that will be second only to US-based Cisco Systems in the field of telecoms equipment.

Alcatel and Lucent expect to complete their marriage by the end of 2006. The companies have already cleared several key regulatory hurdles, including antitrust clearance in the United States and the European Union.

The companies have also submitted a formal notice to the Committee on Foreign Investment in the United States, seeking US governmental approval of their merger.

In 2005 the two groups would have had combined sales of 21 billion euros.

The merger plan calls for an exchange of shares, 0.1952 Alcatel shares for one Lucent share.

Alcatel would have greater weight than Lucent in the combined entity, which would be based and legally registered in Paris. Alctael shareholders would hold 60 percent of the company and Lucent shareholders 40 percent.

The two groups at the end of 2005 had a combined workforce of about 88,000 people. But with the merger an estimated 8,800 jobs are to be eliminated, the companies have said.

The tie-up is expected to result in cost savings of 1.4 billion euros a year at the end of three years, notably in administration, logistics, purchasing and research and development.

The current chairman of Alcatel, Serge Tchuruk, would become the merged group's non-executive chairman, while Russo would be its chief executive.

Russo would therefore become the first woman to lead a company quoted on France's principal exchange, the CAC 40.

The merger project was announced at the end of March and received a possitive reception on the stock market. Tchuruk at the time argued that Alcatel and Lucent were "complementary" and that the telecom equipment sector was in need of consolidation.

But in the United States Lucent shareholders initially voiced displeasure and sought a postponement of the general assembly to protest a merger price they judged to be too low. Lucent managers eventually reached an accord with two blocs of shareholders, Resnick and AT Maley Trust, who agreed to call off a legal challenge.

In France some Alcatel shareholders had also lost their enthusiasm for the deal on learning that Lucent suffered an 82 percent decline in net earnings in the first nine months of its fiscal year.

Alcatel and Lucent are engaged in similar activities providing equipment for fixed and mobile phones, and a merger would create a world leader in telecommunications at a time of widespread consolidation among operators.

An earlier merger attempt failed in 2001.

The equipment-making arm of American Telephone and Telegraph that broke off and became independent in 1996, Lucent grew rapidly in the late 1990s until the technology bubble burst in 2002 when it almost went bankrupt.

It has survived through thousands of layoffs and drastic budget cuts.

Alcatel was also hard hit by the bursting of the Internet and high-tech bubble.

Both companies offer triple play and quadruple play systems for the Internet, telephones both fixed and mobile, and television, and are also working on new ideas on network renewal.

But Alcatel, unlike Lucent, is involved artificial satellites.

While Lucent is active mainly on the US market Alcatel focuses its operations on Europe and Asia.

[Proud_USA_Republican]

Wait till Lucent management tries to layoff any of the french workers.

[Prodn2000]

I was against this merger back in 2001 because of national security concerns. I wonder what they have done to alleviate those?