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Alcatel to Buy Lucent, Cut 8800 Jobs

Photonics.com
Apr 2006
PARIS and MURRAY HILL, N.J., April 3, 2006 -- Telecom equipment maker Alcatel of France will acquire competitor Lucent Technologies for $13 billion in stock, creating a company with annual worldwide sales of $25 billion and approximately 80,000 employees, the two companies announced yesterday.

Under terms of the deal, which has been approved by the boards of directors of both companies, Alcatel will distribute $13.5 billion in stock to Lucent shareholders. Alcatel shareholders will ultimately own 60 percent of the new company and Lucent shareholders 40 percent. The combined company, unnamed as of yet, will be incorporated in France, with executive offices located in Paris. Lucent Chairman and CEO Patricia Russo will become CEO of the combined company, while Serge Tchuruk, chairman and CEO of Alcatel, will become non-executive chairman of the new company. The North American operations will be based in New Jersey, where Bell Labs, Lucent's research and development arm, is located. The new board of directors will have equal representation from each company's current board, as well as two new independent European directors to be mutally agreed upon.

In a joint statement, the companies said the new company will reduce their current combined worldwide workforce by approximately 10 percent, or 8,800 of the 88,000 total workers, resulting in an annual savings of at least $1.7 billion, they said. The reduction is expected to be completed within two years of the closing.

The deal is subject to customary regulatory and governmental reviews in the US, Europe and elsewhere, as well as the approval by shareholders of both companies and other customary conditions. The transaction is expected to be completed in six to 12 months. Until the merger is completed, both companies will continue to operate their businesses independently, the companies said.

In a separate statement released today, Lucent said it will create a separate subsidiary to perform classified research and development work for the US government. Speculation that France-based Alcatel would buy the US's Lucent generated some concerns from national security analysts, who in articles published in the Washington Post and elsewhere before the deal was officially announced compared it to the recent furor over a Dubai-based company's plan to manage US ports. They said the Alcatel/Lucent deal could become another example of a foreign company handling an area sensitive to US security that might meet with resistance from federal authorities.

In its statement, Lucent said it will form the separate subsidiary for R&D work done by Bell Labs for the US government, and will create a separate, independent, government-approved board whose members are proposed to include former Secretary of Defense William Perry, former director of Central Intelligence James Woolsey and former National Security Agency Director Kenneth Minihan. Lucent said most of the work done by Bell Labs is of a commercial nature.

Bell Labs President Jeong Kim, a former Navy nuclear submarine officer, will continue to lead Bell Labs, Lucent said, and its facilities will remain based in New Jersey. For more information, visit: www.alcatel.com or www.lucent.com



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