Alcatel, Lucent in $34 billion merger talks
March 25, 2006
Alcatel is in merger talks with smaller U.S. rival Lucent Technologies aimed at creating the world’s biggest telecommunications equipment company, with combined sales of $25.33 billion.
The announcement of the talks overnight on Friday drove Alcatel shares to their highest level in two years.
The two broke off advanced merger talks in 2001, after Lucent balked at the idea of Alcatel domination. They said on Thursday that they had started discussing a "merger of equals" that was intended to be priced at market, meaning with no premium on their stock prices.
A deal would give the two companies a combined market capitalization of more than $33.78 billion (28 billion euros), with Alcatel accounting for $22.02 billion of that value.
Alcatel’s shares are pricier than Lucent’s. The French company’s stock was trading on a prospective 2006 price-to-earnings ratio of 19 times, while Lucent was on a little more than 14 times.
Their combination would produce a company with sales larger than market leader Cisco Systems and would mark the latest round of consolidation in the telecommunications and media sector, as companies respond to the rapid conversion of technologies and the growth of "triple plays," the provision of TV, high-speed Internet and voice services over phone or cable lines.
"The customer suggests what the vendor should do. Purchasing power comes with being big. And secondly, there are always synergies to be made by combining operations," Lucent Chief Operating Officer Frank d’Amelio told Reuters two weeks ago, when asked about mergers between equipment vendors.
Major customers like AT&T have already been consolidating, with the latest move being the $64.5 billion AT&T bid for BellSouth.
more at C|NET.
