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Alcatel and Lucent Technologies to Merge

Posted on 3-Apr-2006 07:18 | Filed under: News

Alcatel and Lucent Technologies have entered into a definitive merger agreement to create a global communications solutions provider with wireless, wireline and services portfolio.

Patricia Russo is currently Chairman and CEO of Lucent and will become CEO of the combined company. Serge Tchuruk, currently Chairman and CEO of Alcatel will become non-executive chairman of the new company.

A name has not been decided yet, but the combined company will have an aggregate market capitalization of approximately Euro 30 billion (USD 36 billion), based upon the closing prices on 31 March. Looking at calendar 2005 sales, the combined company will have revenues of approximately Euro 21 billion (USD 25 billion), divided almost evenly among North America, Europe and the rest of the world. As of December 31, 2005, the combined companies had about 88,000 employees.

The transaction include some coveted R&D capabilities, including Bell Labs, with 26,100 R&D engineers and scientists throughout the world. The new organisation will have a global foot print and diversified customer base with a presence in more than 130 countries, and 88,000 employees.

Beginning immediately after closing, there will be a Management Committee that will work towards this end, while ensuring continuity in the management of the two companies. This Management Committee of the combined company will be headed by Patricia Russo, CEO, will also consist of Mike Quigley, COO; Frank D'Amelio, Senior EVP, who will oversee the integration and the operations ; Jean-Pascal Beaufret, CFO; Etienne Fouques, EVP, who will supervise the emerging countries strategy; and Claire Pedini, Senior VP, Human Resources. Additional organization and management team announcements will be made at a future date.

Layoffs are not out of the sight, with the companies planning a "structure optmisation" including the reduction of the combined worldwide workforce by approximately 10 percent.

Between signing and closing, Serge Tchuruk and Patricia Russo will supervise an integration team to be nominated shortly, which will seek to ensure that synergies will start to be realized as soon as closing takes place.

The combined company created by this merger is incorporated in France, with executive offices located in Paris. The North American operations will be based in New Jersey, U.S.A., where global Bell Labs will remain headquartered. The board of directors of the combined company will be composed of 14 members and will have equal representation from each company, including Tchuruk and Russo, five of Alcatel's current directors and five of Lucent's current directors. The board will also include two new independent European directors to be mutually agreed upon.

A separate, independent U.S. subsidiary holding certain contracts with U.S. government agencies, will be created. This subsidiary would be separately managed by a board, to be composed of three independent U.S. citizens acceptable to the U.S. government. This type of structure is routinely used to protect certain government programs in the course of mergers involving a non-U.S. party.

The merger is subject to customary regulatory and governmental reviews in the United States, 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 twelve months. Until the merger is completed, both companies will continue to operate their businesses independently.