Alcatel-Lucent deal receives approval from shareholders

A long anticipated merger deal to create a major global telecommunications equipment maker came alive yesterday when Alcatel SA and Lucent Technologies Inc. both got their shareholders approval for their planned merger.

The merger deal worth US$10.7bn (8.4bn euros, £5.7bn) got the nod after both telecoms equipment providers held shareholders' meetings on September 7.

The near-simultaneous votes in Paris and Wilmington, Delaware, gave the permission for Alcatel's all-stock acquisition of Lucent, expected to complete by the end of the current year.

Paris, France based Alcatel and Murray Hill, New Jersey-based Lucent believes that combining their businesses will enable them to address customers across both continents and improve their operational efficiencies to compete in Asia, as well.

Earlier, majority of Alcatel shareholders had complained that they were paying too much for Lucent in the light of weaker earnings and guidance registered by the U.S. Company since the combination was negotiated.

On the other hand, Lucent, which had confronted vocal but less widespread opposition from some of its own investors, last week, settled two shareholder lawsuits that had threatened to delay the merger vote.

Alcatel has estimated about $1.7 billion in cost savings over three years resulting from the merger. The merger deal won the support of more than 85% of Alcatel investors.

The company recently also announced that it would buy some wireless assets for US$320 million from another telecommunications equipment rival, Nortel Networks.

About the deal with Lucent, Alcatel chairman and CEO, Serge Tchuruk, said, "This significant transaction is about creating the world leader in our industry."

Earlier, on April 2, 2006, Lucent announced a merger agreement with Alcatel, which is 1.5 times the size of Lucent. However, the deal will create a market leader with annual sales of approximately $25bn, but the merged firm, whose headquarters will be in Paris, is likely to slash nearly 9,000 jobs or about one in ten workers.

Lucent's CEO Patricia Russo will lead the combined company, and Alcatel's chairman and CEO, Serge Tchuruk, will remain non-executive president of the combined firm.

The deal, which has already been approved by several key regulatory and antitrust milestones including the European Commission and US anti-trust regulators, now seeks approval from US government for the purpose the companies have submitted a formal notice to the Committee on Foreign Investment in the United States (CFIUS).

Emphasizing on the significance of the merger deal, Lucent CEO Patricia Russo told shareholders that the deal would create the first truly global company in the sector. "On our first day in operation, we'll be the No. 1 company in wireline, we'll be No. 3 in wireless and in the top three in services," Russo said.

The stock prices of both companies, which supply transmission and switching gear to telecom businesses and Internet operators, have dipped since the April merger announcement, sapping passion for the deal among investors.

Alcatel shares dropped 1.6% to close at US$12.08 (euro9.43) in Paris trading, while Lucent shares ended 0.9% lower US$2.25 (euro1.76) on the New York Stock Exchange, yesterday.