SAN FRANCISCO – France’s Alcatel SA said Sunday it agreed to acquire Lucent Technologies Inc. for $13.45 billion in stock, expanding Alcatel’s share of the U.S. market and placing it among the world’s top two makers of communications equipment.
The deal values Lucent at $3.01 a share, slightly less than the stock’s Friday closing price of $3.05 but about 7 percent higher than its price on March 23, the day before Alcatel and Lucent revealed their merger talks.
Lucent shareholders, who will own 40 percent of the combined company, will get 0.1952 shares of an Alcatel American depositary receipt for each share of Lucent, according to a statement released by the companies.
Lucent Chief Executive Patricia Russo will lead the new firm, while Alcatel Chairman and Chief Executive Serge Tchuruk will become non-executive chairman. Lucent and Alcatel will have equal representation on the board, which will then set up an independent, U.S.-based subsidiary to oversee Lucent’s classified contracts with the U.S. government and military.
The companies will eliminate approximately 8,000 jobs in the two years after the close of the transaction, which is expected within six to 12 months.
The deal will likely help Alcatel, now Europe’s second-largest telecom vendor, sell more equipment to big American phone companies and long-time Lucent customers such as AT&T and Verizon Communications Inc.
Acquiring Murray Hill, N.J.-based Lucent, which gets half its $9.4 billion in revenue from sales of wireless gear, also would place Alcatel among the leaders in a fast-growing market where it now lags.
For Lucent, the former Bell Labs that was spun out of AT&T in 1996, the sale marks the end of a five-year struggle during which its sales fell and profit plummeted after global spending on telecom equipment collapsed. The company has cut tens of thousand of jobs since then.
The transaction prices Lucent shares at a fraction of their 1999 high near $65 a share, representing a blow to longtime investors of the stock, among the most widely held U.S. issues.
The combined company will have a market value of $36 billion and would have had 2005 sales of $25 billion, according to the companies. Those calendar-year sales would place it next to Cisco Systems Inc. in the combined market for telecom and Internet gear. Cisco had sales of $24.8 billion for its fiscal year ended in July.
Alcatel and Lucent will undertake a restructuring that will result in approximately $1.7 billion in charges, according to the companies. Most of those charges will be recorded during the first year after the deal is closed. The restructuring, which is expected to be completed within 24 months of the transaction’s close, will cut 10 percent of the new company’s combined global workforce of 88,000 and result in annual pre-tax cost savings of $1.7 billion.