Despite opposition, Alcatel, Lucent merger likely

05 Sep 2006

(Associated Press via NewsEdge) Despite some opposition in Europe, the $11-billion merger of Alcatel and Lucent appears likely to squeak through when the companies' long-suffering stockholders vote on the deal this week.

The heads of the two struggling telecom equipment and service companies are hardly taking approval for granted, given the collapse of a prior combination attempt five years ago.

Serge Tchuruk, CEO of Paris-based Alcatel since 1995, and Patricia Russo, CEO of New Jersey-based Lucent since 2002, have been busy promoting Alcatel's proposed stock-for-stock acquisition of Lucent to the financial community.

They say fusing two companies with complementary technology and limited overlap geographically will improve profit margins by cutting about 9,000 of 88,000 combined jobs, reducing other costs and negotiating better prices with suppliers and their biggest customers.

The companies have predicted they'll see about $1.7 billion in savings within three years.

According to Russo, the deal would create a company with the industry's broadest portfolio of products and one of the largest research and development operations, including Lucent's storied Bell Labs.

Russo will be the CEO of the new company, Alcatel/Lucent, and Tchuruk will be board chairman.

Shortly before Russo took over at Lucent, a proposal to combine the two companies fell apart midstream, with analysts blaming Alcatel's unwillingness to make it a merger of equals.

However, European analysts and a French institutional investor advisory service, Proxinvest, say the merger agreement shortchanges Alcatel shareholders, saddling them with Lucent's weaker balance sheet and substantial future pension obligations.

© 2006 The Associated Press

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