Alcatel, Lucent Negotiate Final Details of $32 Billion Trans-Atlantic Deal
Dow Jones Online News, 05/28/2001 10:08
By Kevin J. Delaney and Nikhil Deogun Staff Reporters of The Wall Street Journal
Alcatel SA and Lucent Technologies Inc. met over the weekend to wrap up negotiations so that they could announce Alcatel's acquisition of Lucent for roughly $32 billion (37.25 billion euros) in stock by Wednesday.
As of Sunday afternoon, people familiar with the discussions said the two companies had made progress and could present the deal to their boards for final approval on Tuesday, with an announcement coming on Wednesday.
The people said there still was work to be done and the discussions could still founder. For instance, a continued drop in Alcatel shares could pose problems in finalizing any transaction. But the two sides appear to be closing in on Alcatel's all-stock acquisition of Lucent.
Under the scenario being discussed, Alcatel would acquire Lucent for little or no premium over its current stock price, people familiar with the matter said. Furthermore, the combined company would likely be headquartered in the U.S. even though it would be legally incorporated in France, these people say. Instead of being called Alcatel or Lucent, the two companies were this weekend discussing choosing a new name should the merger be completed.
Among the key factors driving any merger is the $4 billion in annual cost savings projected by the companies, according to people familiar with the talks.
These people said, under the current scenario, Lucent would go ahead with plans to distribute shares in its Agere Systems Inc. affiliate to Lucent shareholders. Since the Murray Hill, New Jersey, company carved out its optoelectronics unit earlier this year, it has been expected to spin off the more than one billion shares it owns in Agere by Sept. 30.
Alcatel's market capitalization is just over $34.5 billion based on Friday's close of 31.95 euros per share. The two companies may portray the deal as a merger, with equal board representation. Henry Schacht, Lucent's chief executive, is likely to have a significant role at the combined company even though Serge Tchuruk, Alcatel's chief executive, will be CEO.
Strategically, a linkup with Alcatel could be a quick way for Lucent to extinguish a host of financial woes. And a shrinking market for telecommunications equipment makes the company's rebuilding efforts only more difficult.
France's Alcatel, on the other hand, is one of the few telecom-equipment makers world-wide whose foundations haven't been shaken by the broad sector downdraft that has humbled Lucent, Cisco Systems, Ericsson, and others. In part, that's because only 22% of the company's sales last year came from the U.S., where equipment purchases have fallen off most dramatically.
Any transaction between the two companies is expected to undergo serious regulatory scrutiny on both sides of the Atlantic. Already, some U.S. politicians have begun signaling their likely opposition to any deal, for fear that Alcatel's acquisition of Lucent's Bell Labs research unit poses a national-security risk.
Both companies have declined to comment on any talks.
Dennis Berman contributed to this article.
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