Tags: Alcatel | and | Lucent | Shareholders | Back | Merger

Alcatel and Lucent Shareholders Back Merger

Thursday, 07 September 2006 12:00 AM

PARIS/NEW YORK -- Alcatel and Lucent on Thursday moved closer to tying the knot after their shareholders backed the French telecoms equipment group's $10.9 billion all-share acquisition of its U.S. rival.

Their approval puts an end to weeks of debate about the merits of the deal.

The merger will turn the pair into one of the world's leading suppliers of network hardware and software for mobile communications, high-speed Internet and TV broadcasting over ADSL phone lines.

By combining their operations, the French and U.S groups will widen their global footprint and boost their competitive clout in markets dominated by cut-throat rivalry.

Alcatel and Lucent hope to close the deal by the end of the year but still need clearance from the U.S. Committee on Foreign Investment.

Alcatel Chief Executive Serge Tchuruk thanked shareholders for backing the merger with more than 85 percent of the votes.

"I would like to express to you my gratitude ... you can be assured the board will do all that it can to deserve the trust you have just placed in it," he told 1,500 shareholders packed in the cavernous hall of the Bercy sports and music stadium.

Tchuruk extolled the virtues of the merger for more than an hour, without using notes.

"Your company is facing a historic turn," he said. "I am convinced this is the right operation for Alcatel.

Meanwhile, Lucent chief executive Pat Russo told her shareholders at a gathering in Wilmington, Delaware, that the merger was crucial to survival.

"We've already seen significant consolidation in the service provider space whether it be a combination of Cingular and AT&T Wireless, Sprint and Nextel, Verizon and MCI, or SBC, AT&T and BellSouth," she said.

"The networks created by these combinations will be best served by suppliers who have significantly greater size and scope."

This year, rival Siemens (SIEGn.DE) joined forces with Nokia (NOK1V.HE), and giant Ericsson (ERICb.ST) completed the acquisition of Marconi's network equipment assets.

Earlier this month, Alcatel signed a preliminary agreement to buy Nortel's (Toronto:NT.TO - news) third-generation UMTS cellphone network unit for $320 million which, together with Lucent, will turn the trio into the world's third-largest provider of UMTS networks.

Alcatel is offering Lucent shareholders 0.1952 of an Alcatel share for every Lucent share they own, valuing each Alcatel share at about five Lucent shares.

Some investors, including the advisory firm Proxinvest, had argued Alcatel was overpaying for Lucent after the U.S. group issued a profit warning in July, and wanted the exchange ratio to be closer to seven Lucent shares.

Marcel Tixier, head of the National Association of Shareholders in France, criticised the transaction. "This is an adventure and we don't know where it will lead," Tixier said at the gathering.

But in spite of concerns about valuation, many shareholders said they believed in the long-term prospects of the deal.

"We don't have a choice, we have to do the merger," said Alain Finot, 58, a financial adviser who traveled from the northern French city of Lille to attend the meeting.

Russo, who will become chief executive of the combined group, reiterated that the merger was one of equals.

But well-known shareholder rights advocate Evelyn Y. Davis disagreed. "The idea of a merger of equals is a big laugh," she said, addressing Russo.

"The French will make things miserable for you ... Remember, Pat, you will be the prime minister but the prime minister serves at the discretion of the king and the king is Serge Tchuruk."

Tchuruk, however, said he was not planning to get involved in the day-to-day operational management of the combined business after the deal was sealed and he became chairman.

Shares of Lucent and Alcatel have lost more than 25 percent since they announced the merger proposal in early April.

"Lucent's strength is not appreciated by many investors, but it has real technology that will be complemented by Alcatel's strength ... Moreover, the market is about economies of scale, and without this deal they would have risked falling behind," said Bernstein analyst Paul Sagawa.

Alcatel shares closed 1.6 percent lower at 9.43 euros. Lucent shares were down 1 cent at $2.26 in afternoon trade.

(c) 2006 Reuters. All rights reserved.


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PARIS/NEW YORK -- Alcatel and Lucenton Thursday moved closer to tying the knot after their shareholders backed the French telecoms equipment group's $10.9 billion all-share acquisition of its U.S. rival. Their approval puts an end to weeks of debate about the merits of...
Thursday, 07 September 2006 12:00 AM
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