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Alcatel and Lucent Reach Merger Agreement

6:00 am on April 3, 2006 | Category: Business, Corporate

French-based telecom equipment giant, Alcaltel, announced yesterday that it has reached an agreement to buyout smaller American rival, Lucent Technologies, in a deal worth $13.4 billion.

As the merger proceeds, the companies will conduct â€œfair and balancedâ€ cuts, eliminating about 10% of their combined work force, or 8,800 jobs. This means that the merger will ultimately save money, in addition to giving Alcatel more bargaining power when negotiating with telecom carriers and other customers. There will also be the added benefit of a much larger research and development base to draw upon.

“As we looked at this there is no question this is an R&D issue. Competition is increasing and size and scale really matter,” said the Chief Executive Lucent, Patricia Russo. Although she does not speak French, Russo will serve as CEO of the newly combined company, after Alcatelâ€™s current CEO, Serge Tchuruk, retires from his position later this year.

Tchuruk will stay on as a non-executive chairman even after his retirement, and both companies will have equal representation on the new board. In terms of ownership, Alcatel will own 60% of the combined entity, and expects the merger to have a positive impact on earnings per share over the next year.

Once the integration of the two companies is complete, executives hope to combine Alcatelâ€™s strong position in DSL equipment, with Lucentâ€™s dominance in cellular technology and contacts with US carriers such as Verizon.

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