FOR RELEASE SUNDAY APRIL 02, 2006
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Combined company will have strong financial base and revenues of
approximately Euro 21 billion (USD25 billion) based on calendar 2005
results
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Creates new growth opportunities and identifies annual pre-tax cost
synergies of approximately Euro 1.4 billion (USD1.7 billion) within three
years
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Creates global convergence leader with most comprehensive wireless,
wireline and services portfolio in the industry
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Features one of the largest global R&D capabilities in
communications
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Serge Tchuruk to be non-executive chairman, Patricia Russo to be CEO,
based in Paris; equal board representation from both companies in merger of
equals
Paris and Murray Hill, N.J., April 2, 2006 - Alcatel (Paris: CGEP.PA,
NYSE: ALA) and Lucent Technologies (NYSE: LU) today announced that they have
entered into a definitive merger agreement to create the first truly global
communications solutions provider with the broadest wireless, wireline and
services portfolio in the industry. The primary driver of the combination is to
generate significant growth in revenues and earnings based on the market
opportunities for next-generation networks, services and applications, while
yielding significant synergies. The combined company's increased scale, scope
and global capabilities will enhance its long-term value for shareowners,
customers and employees. The transaction, which was approved by the boards of
directors of both companies, will build upon the complementary strengths of
each company to create a global leader in the transformation of next-generation
wireless, wireline and converged networks.
Strategic Fit Creates Global Leader in Next-Generation Networks and
Services
"This combination is about a strategic fit between two experienced and
well-respected global communications leaders who together will become the
global leader in convergence," said Serge Tchuruk, chairman and CEO of
Alcatel who will become non-executive chairman of the combined company. "A
combined Alcatel and Lucent will be global in scale, have clear leadership in
the areas that will define next-generation networks, boast one of the largest
research and development capabilities focused on communications, and employ the
largest and most experienced global services team in the industry. It will
create enhanced value for shareholders of both companies who will benefit from
owning the most dynamic, global player in the communications
industry."
Patricia Russo, chairman and CEO of Lucent who will become CEO of the combined
company said, "The strategic logic driving this transaction is compelling.
The communications industry is at the beginning of a significant transformation
of network technologies, applications and services -- one that is projected to
enable converged services across service-provider networks, enterprise networks
and an array of personal devices. This presents extraordinary opportunities for
our combined company to accelerate its growth. The combination creates a new
industry competitor with the most comprehensive portfolio that will be poised
to deliver significant benefits to customers, shareowners and
employees."
Overview of Strategic Combination
The combined company, which will be named at a later date, will have an
aggregate market capitalization of approximately Euro 30 billion (USD36
billion), based upon the closing prices on Friday, March 31. Based on calendar
2005 sales, the combined company will have revenues of approximately Euro 21
billion (USD25 billion), divided almost evenly among North America, Europe and
the rest of the world. As of December 31, 2005, the combined companies had
about 88,000 employees.
The combined company will have:
- A strong financial base and achieve annual pre-tax cost synergies of about
Euro 1.4 billion (USD1.7 billion) within three years, a substantial majority of
which is expected to be achieved in the first two years
- The largest and most experienced global services and support organization
in the industry
- A leading position in communications solutions, with the broadest wireless
and wireline portfolio
- Deep and strong, long-term relationships with every major service provider
around the world
- A growing momentum in high-end enterprise technologies and markets,
including mission critical safety and security applications
- The industry's premier R&D capabilities, including Bell Labs, with
26,100 R&D engineers and scientists throughout the world
- An experienced international management team with a common vision and
proven track record
- An enhanced global foot print and diversified customer base with a presence
in more than 130 countries
The cost synergies are expected to be achieved within three years of closing
and will come from several areas, including 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. The merger also will result in approximately Euro 1.4
billion (USD1.7 billion) in new cash restructuring charges, with the charges to
be recorded primarily in the first year. A substantial majority of the
restructuring is expected to be completed within 24 months after closing. The
transaction is expected to be accretive to earnings per share in the first year
post closing with synergies, excluding restructuring charges and amortization
of intangible assets.
A Globally Managed Company
The combined company will be managed by a team that reflects a balance between
the two organizations, taking into account the best talents of each company and
the multicultural nature of its workforce. Beginning immediately after closing,
there will be a Management Committee that will work towards this end, while
ensuring continuity in the management of the two companies. This Management
Committee of 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. Additional organization and management team
announcements will be made at a future date. Between signing and closing, Serge
Tchuruk and Patricia Russo will supervise an integration team to be nominated
shortly, which will seek to ensure that synergies will start to be realized as
soon as closing takes place.
Overview of the Transaction
Under the terms of the agreement, 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.
Upon completion of the merger, Alcatel shareholders will own approximately 60
percent of the combined company and Lucent shareholders will own approximately
40 percent of the combined company. The combined company's ordinary shares will
continue to be traded on the Euronext Paris and the ADSs representing ordinary
shares will continue to be traded on the New York Stock Exchange.
The combined company created by this merger of equals is incorporated in
France, with executive offices located in Paris. The North American operations
will be based in New Jersey, U.S.A., where global Bell Labs will remain
headquartered. The board of directors of the combined company will be composed
of 14 members and will have equal representation from each company, including
Tchuruk and Russo, five of Alcatel's current directors and five of Lucent's
current directors. The board will also include two new independent European
directors to be mutually agreed upon.
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. This type of structure is routinely
used to protect certain government programs in the course of mergers involving
a non-U.S. party.
The combined company will remain the industrial partner of Thales and a key
shareholder alongside the French state. Directors to the Thales board who are
nominated by the combined company would be European Union citizens. Serge
Tchuruk, or a French director or a French corporate executive of the combined
company would be the principal liaison with Thales. Furthermore, the board of
Alcatel has approved the continuation of negotiations with Thales with a view
to reinforce the partnership through the contribution of certain assets and an
increased shareholding position in Thales.
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. The transaction is expected to
be completed in six to twelve months. Until the merger is completed, both
companies will continue to operate their businesses independently.
Commitments to Customers and Stakeholders
"Our customers will benefit from a partner with the scale and scope to
design, build and manage increasingly converged networks that deliver the most
advanced communications services to the market. That is what this combination
will deliver with an unparalleled focus on execution, innovation and service
for our customers," said Patricia Russo. "Serge and I will work hard
with our leadership team to draw upon the key strengths and common culture of
technical excellence within each company to uniquely position the combined
company for success, growth and value creation from next-generation networking
and services." "We are committed to moving forward aggressively after
closing and quickly combining our operations and integrating our corporate
cultures to ensure that we capture the full benefits of this combination for
our customers, our shareowners and our employees," Serge Tchuruk said.
"We share a vision of where networks are going; a commitment to world-class
customer service; and a highly skilled, motivated and global workforce. We are
excited about the tremendous opportunity to establish the course for this
future together."
About Alcatel
Alcatel provides communications solutions to telecommunication carriers,
Internet service providers and enterprises for delivery of voice, data and
video applications to their customers or employees. Alcatel brings its leading
position in fixed and mobile broadband networks, applications and services, to
help its partners and customers build a user-centric broadband world. With
sales of EURO 13.1 billion and 58,000 employees in 2005, Alcatel operates in
more than 130 countries. For more information, visit Alcatel on the Internet:
http://www.alcatel.com
About Lucent
Lucent designs and delivers the systems, services and software that drive
next-generation communications networks. Backed by Bell Labs research and
development, Lucent uses its strengths in mobility, optical, software, data and
voice networking technologies, as well as services, to create new
revenue-generating opportunities for its customers, while enabling them to
quickly deploy and better manage their networks. Lucent's customer base
includes communications service providers, governments and enterprises
worldwide. For more information on Lucent, which has headquarters in Murray
Hill, N.J., U.S.A., visit http://www.lucent.com.
Legal and Financial Advisors
Alcatel's financial advisors on this transaction were Goldman Sachs, with
Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel. Lucent's
financial advisors were JPMorgan and Morgan Stanley and Wachtell, Lipton, Rosen
& Katz as legal counsel.
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS
This press release contains statements regarding the proposed transaction
between Lucent and Alcatel, the expected timetable for completing the
transaction, future financial and operating results, benefits and synergies of
the proposed transaction and other statements about Lucent and Alcatel's
managements' future expectations, beliefs, goals, plans or prospects that are
based on current expectations, estimates, forecasts and projections about
Lucent and Alcatel and the combined company, as well as Lucent's and Alcatel's
and the combined company's future performance and the industries in which
Lucent and Alcatel operate and the combined company will operate, in addition
to managements' assumptions. These statements constitute forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. Words such as "expects," "anticipates,"
"targets," "goals," "projects," "intends,"
"plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements which are not statements of historical facts. These
forward-looking statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to assess.
Therefore, actual outcomes and results may differ materially from what is
expressed or forecasted in such forward-looking statements. These risks and
uncertainties are based upon a number of important factors including, among
others: the ability to consummate the proposed transaction; difficulties and
delays in obtaining regulatory approvals for the proposed transaction;
difficulties and delays in achieving synergies and cost savings; potential
difficulties in meeting conditions set forth in the definitive merger agreement
entered into by Lucent and Alcatel; fluctuations in the telecommunications
market; the pricing, cost and other risks inherent in long-term sales
agreements; exposure to the credit risk of customers; reliance on a limited
number of contract manufacturers to supply products we sell; the social,
political and economic risks of our respective global operations; the costs and
risks associated with pension and postretirement benefit obligations; the
complexity of products sold; changes to existing regulations or technical
standards; existing and future litigation; difficulties and costs in protecting
intellectual property rights and exposure to infringement claims by others; and
compliance with environmental, health and safety laws. For a more complete list
and description of such risks and uncertainties, refer to Lucent's Form 10-K
for the year ended September 30, 2005 and Alcatel's Form 20-F for the year
ended December 31, 2005 as well as other filings by Lucent and Alcatel with the
US Securities and Exchange Commission. Except as required under the US federal
securities laws and the rules and regulations of the US Securities and Exchange
Commission, Lucent and Alcatel disclaim any intention or obligation to update
any forward-looking statements after the distribution of this press release,
whether as a result of new information, future events, developments, changes in
assumptions or otherwise.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed transaction, Alcatel and Lucent intend to file
relevant materials with the Securities and Exchange Commission (the
"SEC"), including the filing by Alcatel with the SEC of a Registration
Statement on Form F-6 and a Registration Statement on Form F-4 (collectively,
the "Registration Statements"), which will include a preliminary
prospectus, a final prospectus and related materials to register the Alcatel
American Depositary Shares ("ADSs"), as well as the Alcatel ordinary
shares underlying such Alcatel ADSs, to be issued in exchange for Lucent common
shares, and Lucent and Alcatel plan to file with the SEC and mail to security
holders a Proxy Statement/Prospectus relating to the proposed transaction. The
Registration Statements and the Proxy Statement/Prospectus will contain
important information about Lucent, Alcatel, the transaction and related
matters. Investors and security holders are urged to read the Registration
Statements and the Proxy Statement/Prospectus carefully when they are
available. Investors and security holders will be able to obtain free copies of
the Registration Statements and the Information Statement/Proxy
Statement/Prospectus and other documents filed with the SEC by Lucent and
Alcatel through the web site maintained by the SEC at www.sec.gov . In addition, investors and security
holders will be able to obtain free copies of the Registration Statements and
the Information Statement/Proxy Statement/Prospectus when they become available
from Lucent by contacting Investor Relations at www.lucent.com , by mail to 600 Mountain
Avenue, Murray Hill, New Jersey 07974 or by telephone at 908-582-8500 and from
Alcatel by contacting Investor Relations at www.alcatel.com , by mail to 54, rue La
Boétie, 75008 Paris, France or by telephone at 33-1-40-76-10-10.
Lucent and its directors and executive officers also may be deemed to be
participants in the solicitation of proxies from the stockholders of Lucent in
connection with the transaction described herein. Information regarding the
special interests of these directors and executive officers in the transaction
described herein will be included in the Proxy Statement/Prospectus described
above. Additional information regarding these directors and executive officers
is also included in Lucent's proxy statement for its 2006 Annual Meeting of
Stockholders, which was filed with the SEC on or about January 3, 2006. This
document is available free of charge at the SEC's web site at www.sec.gov and from Lucent by contacting
Investor Relations at www.lucent.com , by
mail to 600 Mountain Avenue, Murray Hill, New Jersey 07974 or by telephone at
908-582-8500.
Alcatel and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of Lucent in
connection with the transaction described herein. Information regarding the
special interests of these directors and executive officers in the transaction
described herein will be included in the Proxy Statement/Prospectus described
above. Additional information regarding these directors and executive officers
is also included in Alcatel's information statements for its 2005 Assemblée
Générale Mixte Ordinaire Et Extraordinaire. These documents are available from
Alcatel by contacting Investor Relations at www.alcatel.com , by mail to 54, rue La
Boétie, 75008 Paris, France or by telephone at 33-1-40-76-10-10.
For more information, reporters may contact:
For Lucent Technologies:
Bill Price
Lucent Technologies
+1 908 582 4820
+1 201 214 5123 (mobile)
Email:williamprice@lucent.com
Joan Campion
Lucent Technologies
+1 908 582 5832
+1 201 761 9384 (mobile)
Email:joancampion@lucent.com
For Lucent Technologies investors:
John DeBono
Lucent Technologies
+1 908 582 7793
Email:debono@lucent.com
Dina Fede
Lucent Technologies
+1 908 582 0366
Email:fede@lucent.com
For Alcatel:
Régine Coqueran
Alcatel
+33 (0)1 40 76 49 24
Email:regine.coqueran@alcatel.com
Mark Burnworth
Alcatel
+33 (0)1 40 76 50 84
Email:mark.burnworth@alcatel.com
For Alcatel investors:
Pascal Bantegnie
Alcatel
+33 1 40 76 52 20
Email:pascal.bantegnie@alcatel.com
Nicolas Leyssieux
Alcatel
+33 1 40 76 37 32
Email:nicolas.leyssieux@alcatel.com
Maria Alcon
Alcatel
+33 1 40 76 15 17
Email:maria.alcon@alcatel.com
Charlotte Laurent-Ottomane
Alcatel
+1 703 668 7016
Email:charlotte.laurent-ottomane@alcatel.com
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