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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (3372)	5/29/2001 4:31:38 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 3891

Alcatel and Lucent merger talks collapse By Caroline Daniel in London, Richard Waters in New York and Raphael Minder in Paris Published: May 29 2001 19:20GMT \| Last Updated: May 29 2001 20:17GMT Merger negotiations between Alcatel and Lucent Technologies broke down at the 11th hour on Tuesday after the French and US telecommunications equipment companies failed to agree on who would control the new company. Henry Schacht, Lucent's chairman, walked out of talks after Serge Tchuruk, his counterpart at Alcatel, refused to give the US company equal weight in the new company's management. "There were two different visions of this thing," said one person close to the talks. Following marathon talks over the weekend in Paris, executives at both companies had been hoping to conclude a deal on Wednesday. But late on Tuesday night they were still attempting to reach agreement. Christian Reinaudo, president of the optics group, left at about 7pm. "You will soon find out," he said. Late into the evening, a further half a dozen cars remained in the elegant inner courtyard of Alcatel's Paris offices, awaiting the remaining senior executives. Alcatel's shares, which had initially been buoyed by reports that it could be offering a smaller sum for Lucent, closed down 3 per cent on Tuesday. Lucent's shares have now fallen about 15 per cent since news of the talks first emerged, while Alcatel's have fallen about 8 per cent. It is understood that Alcatel had been planning to offer 0.2435 Alcatel shares for each Lucent share, valuing it at about $22bn - somewhat lower than earlier expectations of a "merger of equals". It is understood that agreement had already been reached between the two companies that Serge Tchuruk, 63, chief executive of Alcatel would become head the new company. Krish Prabhu, the well regarded US-based chief operating officer of Alcatel, was expected to take the job of US chief executive of the enlarged entity, scotching rumours that he was poised to leave for a rival. Alcatel's shareholders, contacted on Tuesday, expressed support for the mergers' strategic logic, but questioned whether it was a deal too far for the French group. Emmanuel Morano, fund manager at Sogeposte, the asset management arm of the French post office, which holds about 4m shares in Alcatel, said: "We are surprised by this deal. We did not see it coming. It is a bet at a time when there is a total lack of visibility in the US telecom sector." One fund manager at a leading French bank, added: "This is as risky as it gets. Tchuruk is putting on the line six years of very solid work and a successful revamp for something that may appear an incredible opportunity but that nobody can really quantify as such because nobody knows how damaged Lucent really is." Cost savings from the merger have been estimated at about $4bn. However, one person close to the discussions played down the idea that these would come from a steep round of job cuts. Instead, he said savings would come from, "more efficient R&D spending, an up to 20 per cent reduction on SG&A, and rationalisation of computer systems." However, concerns about Lucent's plans for its fibre optic division, put up for sale earlier this year, remain. Rival bidders, which include Pirelli of Italy, said on Tuesday they were still uncertain about whether the fibre optic division would be sold. news.ft.com