Alcatel and Lucent have entered into a definitive merger agreement. The primary driver of the combination is to generate significant growth in revenues and earnings based on the market opportunities for next-generation networks, services and applications, while yielding significant synergies.
‘This combination is about a strategic fit between two experienced and well-respected global communications leaders who together will become the global leader in convergence,’ said Serge Tchuruk, chairman and CEO of Alcatel who will become non-executive chairman of the combined company. ‘A combined Alcatel and Lucent will be global in scale, have clear leadership in the areas that will define next-generation networks, boast one of the largest research and development capabilities focused on communications, and employ the largest and most experienced global services team in the industry.‘
The combined company will have an aggregate market capitalization of approximately Euro 30 billion (USD36 billion), based upon the closing prices on Friday, March 31. Based on calendar 2005 sales, the combined company will have revenues of approximately Euro 21 billion (USD25 billion.
The cost synergies are expected to be achieved within three years of closing and will come from several areas, including consolidating support functions, optimizing the supply chain and procurement structure, leveraging R&D and services across a larger base, and reducing the combined worldwide workforce by approximately 10 percent. The merger also will result in approximately Euro 1.4 billion (USD1.7 billion) in new cash restructuring charges, with the charges to be recorded primarily in the first year. A substantial majority of the restructuring is expected to be completed within 24 months after closing..
Under the terms of the agreement, Lucent shareowners will receive 0.1952 of an ADS (American Depositary Share) representing ordinary shares of Alcatel (as the combined company) for every common share of Lucent that they currently hold. Upon completion of the merger, Alcatel shareholders will own approximately 60 percent of the combined company and Lucent shareholders will own approximately 40 percent of the combined company.
The combined company created by this merger of equals is incorporated in France, with executive offices located in Paris. The transaction is expected to be completed in six to twelve months. Patricia Russo, chairman and CEO of Lucent, will become CEO of the combined company. Until the merger is completed, both companies will continue to operate their businesses independently.
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