Alcatel and Lucent Technologies have finally decided to tie the knot and merge their two companies, in what amounts to be a gigantic first step in the telecom hardware consolidation. The combined company will have a market capitalization of $36 billion, and will have sales of around $25 billion and will have 88,000 employees. This is not really a merger of equals, and if you read the terms of the deal, its Alcatel swallowing Lucent.
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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.
Serge Tchuruk, chairman and CEO of Alcatel who will become non-executive chairman of the combined company and Patricia Russo, the chair(wo)man and CEO of Lucent will become CEO of the combined company. There are two compelling reasons for this deal – the carriers desire for IMS, the technology that would let them merge the wireline and wireless networks. Lucent has done great work in that space, and the combined company will do well because of that. In addition, it solves Tchuruk’s transition dilemma. He did not have a #2 and with his time was running out – well you know how it is!