Alcatel to Acquire DSC Communications Corporation
In a Stock-For-Stock Transaction
PARIS, France, and DALLAS, June 4 /PRNewswire/ -- Alcatel (NYSE: ALA) and
DSC (Nasdaq: DIGI) jointly announced that they have entered into a definitive
agreement under which Alcatel will acquire DSC in a stock-for-stock
transaction. The acquisition will expand Alcatel's presence in the United
States telecommunications equipment market. The strong position of DSC in
access and switching, fixed and mobile, coupled with Alcatel's leading
position in transmission will create a major company in the U.S. capable of
providing turnkey systems to the incumbent telecommunications operators as
well as new domestic carriers.
Under the terms of the agreement, which has been unanimously approved by
the boards of directors of both companies, DSC shareholders will receive upon
consummation of the transaction 0.815 of an Alcatel ADS (American Depositary
Shares) which represents 0.163 Alcatel ordinary share, for each outstanding
DSC share. Based on the approximately 125 million fully diluted DSC shares
outstanding and the closing price of Alcatel's ADS on Wednesday, June 3, 1998
($43 7/16), the transaction has an implied value of approximately
$4.4 billion. This represents a premium of approximately 80 % over DSC's
closing price per share on June 3, 1998 and 8 % over DSC 's twelve months high
of $32.75.
Taking into account cost savings, Alcatel expects the deal to be neutral
on its 1999 earnings per share and to be accretive thereafter. This does not
take into account the effect of the substantial revenue enhancement which
should result from the transaction and which is its main purpose.
Serge Tchuruk, Chairman and CEO of Alcatel said, "Alcatel's strategy is to
be a preeminent worldwide player in the evolution of networks from narrowband
to broadband, with voice/data convergence. This goal requires highly advanced
broadband technology, already developed by Alcatel, and a more commanding U.S.
presence, which Alcatel is moving towards with its acquisition of DSC. This
acquisition creates an outstanding fit between Alcatel's broadband ATM and
data technology and the strong market position that DSC has developed in
access and switching."
Mr. Tchuruk added, "I want to emphasize that this combination is about
growth, not just cost cutting. As a result of this combination, DSC employees
will have greater career opportunities both in the United States and
internationally. They will play a critical role in the future of the new
company and all of us at Alcatel look forward to working with them to build on
the strengths of the combined company."
James L. Donald, DSC 's Chairman and CEO, said, "This transaction provides
increased value to DSC shareholders. In addition, DSC shareholders will have
an ongoing equity interest in a much larger company with improved long-term
growth potential and investment liquidity. The combined operations of DSC and
Alcatel in the U.S. should also benefit from DSC's established relationships
with the Regional Holding Companies (RHCs), which provide an enhanced platform
for future growth."
Completion of the transaction is subject to approval by DSC shareholders,
the expiration or termination of applicable waiting periods under the
antitrust laws, registration under the U.S. federal securities laws of the
Alcatel ADS's issuable in the transaction, and other customary closing
conditions. The transaction is expected to close in approximately four
months.
Following the acquisition of DSC, Alcatel intends to combine DSC with its
existing U.S. telecommunications equipment business which is primarily
conducted through Alcatel's wholly owned subsidiary, Alcatel Network
Systems, Inc. (ANS). Over the last years, ANS has achieved a leadership
position in SONET transmission systems, with revenues growing 35% in 1996 and
1997, and has become a leading player in the fast developing ADSL market.
The combined entity will continue to be headquartered in Texas, with 7,000
people employed in the Dallas area alone, and with significant operations in
North Carolina and California. Mr. Krish Prabhu, who is currently President
and CEO of ANS, will serve as President and CEO of the combined company. The
proforma combined revenue for DSC and ANS for the twelve months ended
December 31, 1997, was approximately $3 billion. The companies expect annual
savings of approximately $200 million to phase in initially in 1998 with a
full year impact in the year 2000.
The two companies believe that there is a strong strategic fit which will
be particularly productive in the next few years. A clear example is DSC's
established leadership position in fixed access systems in the U.S. with major
RHCs. While these systems are largely configured to support voice services
today, Alcatel's world leading technologies in ATM and xDSL will help DSC
accommodate the fast development of Internet related data services.
Similarly, the intelligent networking products and the comprehensive switching
product line of DSC will be optimized when combined with Alcatel's latest
technologies. DSC's tandem switching activity will be supported by Alcatel's
1000 BBX broadband switch to handle the growing needs of voice and data
traffic in public backbone networks. DSC's current activity in cellular
switching will be significantly enhanced by Alcatel's world-class digital
switching technology available for most mobile standards.
Alcatel is a world leader in telecommunications systems and equipment,
with operations in over 130 countries. It provides complete solutions and
services ranging from backbone networks to user terminals for operators,
service providers, enterprises and consumers. Alcatel Alsthom, to be renamed
Alcatel, has been up to now a multi-business company with revenues of
$31 billion in 1997. It is currently reshaping its portfolio on its core
business, telecom and cables, with a dedicated revenue of $22 billion in 1997.
For more information, visit Alcatel via the web at: alcatel.com.
DSC is a global provider of advanced telecommunications products,
including digital switching, transmission, access and network management
systems. DSC's integrated network solutions support voice, data and broadband
services, such as intelligent network, wireless and switched digital video
applications. DSC had 1997 annual revenues of approximately $1.6 billion and
is active in more than 60 countries worldwide. For more information about DSC
and its products, please visit the company's web site: dsccc.com.
This document may include forward looking statements within the meaning of
Safe Harbor provisions of the U.S. federal securities laws. These statements
are based on current expectations, estimates and projections about the general
economy and Alcatel's and DSC's lines of business and are generally
identifiable by statements containing words such as "expects," "believes,"
"estimates" or similar expression. Statements related to future performance
involve certain assumptions, risks and uncertainties, many of which are beyond
the control of Alcatel or DSC, and cannot be guaranteed. Important factors
that could cause actual results to differ materially from those expectation
include, among others, foreign and domestic product and price competition,
cost effectiveness, changes in governmental regulations, general economic and
market conditions in various geographic areas, interest rates and the
availability of capital. Although Alcatel and DSC believe that their
respective expectations reflected in any such forward looking statements are
based upon reasonable assumptions, they can give no assurance that those
expectations will be achieved.
SOURCE Alcatel
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