Alcatel and Lucent Merger Seeks Global Scale

Alcatel and Lucent Technologies confirmed their plans to merge, creating a global communications solutions provider with US$25 billion in annual sales and a broad product portfolio in wireless and wireline and networking. The companies said the merger was driven by the opportunity to create a truly global company with deep relationships with every major service provider. They also pointed to the ongoing consolidations amongst global service providers.

Key points of the deal include:

• Alcatel shareholders will own approximately 60 percent of the combined company and Lucent shareholders will own approximately 40 percent of the combined company.
• 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.
• The combined company will be incorporated in France and based in Paris
• The name of the combined company will be determined at a later date
• The merger is expected to yield operational cost savings of US$1.7 billion within 3 years by 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.
• As of December 31, 2005, the combined companies had about 88,000 employees.
• The merger also will result in approximately EUR 1.4 billion (USD1.7 billion) in new cash restructuring charges, with the charges to be recorded primarily in the first year.
• The major growth areas for the combined company include 3G Mobility, Triple Play and IPTV, Global Services and Support, the IMS Network Transformation.
• Based on calendar 2005 sales, the combined company will have revenues of approximately EUR 21 billion (USD25 billion), divided almost evenly among North America, Europe and the rest of the world.
• The R&D of the company would include 26,100 employees (15,600 from Alcatel and 10,500 from Lucent) and encompass approximately 25,000 patents.
• The combined company intends to form a separate, independent U.S. subsidiary holding certain contracts with U.S. government agencies. This subsidiary would be separately managed by a board, to be composed of three independent U.S. citizens acceptable to the U.S. government.
• Management structure: Serge Tchuruk will be non-Executive Chairman. The combined company will be headed by Patricia Russo, CEO, and 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.
• 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.

http://www.alcatel.comhttp://www.lucent.com