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Lucent Waits While Alcatel Tackles Space |
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Friday, 31 March 2006 |
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A $36 billion merger of France's Alcatel and U.S. rival Lucent Technologies is "95 percent" complete but is being held up by a politically charged dispute over related space interests, sources close to the matter said on Friday.
By Reuters Alcatel, the world's No. 3 telecommunications equipment supplier, held inconclusive board talks on Thursday and said it was still discussing a merger to be carried out at market prices with its smaller rival, creating the global market leader in sales. Telecoms and network equipment companies are under pressure to merge to keep pace with restructuring and increased pricing power among their customers. At the same time, Alcatel wants to conclude longstanding talks aimed at folding its satellite activities into France's Thales in exchange for a larger stake in the privatized defense electronics company--Europe's largest. By contributing its majority-owned Alcatel Alenia Space subsidiary, Alcatel would see its Thales stake lifted to an estimated 25 or 30 percent from 9.5 percent. But French political and industrial disagreements over whether Airbus parent EADS should also be included in the deal have delayed an immediate Thales deal, and talks were expected to last into the weekend. The issues are indirectly linked since both France and the United States will be eager to ensure that sensitive projects like military satellites and secret research at Lucent's Bell Labs are protected from prying eyes across the Atlantic. Reaching a solution will not be easy. Thales has been locked in one of France's most politically sensitive industrial feuds for months. Alcatel and EADS have long been seen as rival suitors for the firm, which offers more opportunities for defense-related projects that they see as necessary to offset swings in telecommunications and aircraft trends. A satellite trio? Thales is also a major Airbus supplier but has not forgiven EADS co-CEO Noel Forgeard for trying to grab control during a power battle across Europe's aerospace industry in 2004. The competing satellite units are meanwhile limping back to health after an industry slump that hit bottom in 2003. Anxious not to be left behind as Alcatel cements its ties with Thales, EADS is lobbying hard behind the scenes to be included in a three-way deal that would combine Europe's major satellite producers, sources familiar with the matter said. "It must be done simultaneously or not at all," said an industry source familiar with the thinking at EADS. None of the companies involved agreed to comment. French President Jacques Chirac and German Chancellor Angela Merkel have thrown their weight behind the EADS proposal to add its Astrium unit to the mix, industry sources familiar with the issue said on Thursday. EADS, dominated by French and German interests, and Alcatel would then have 20 percent each of Thales and the French state about 22 percent. French Finance Minister Thierry Breton had sided with Alcatel in pushing for a two-stage solution, leaving EADS out for now and freeing Alcatel to push ahead with Lucent and Thales, the sources said. However, Breton told a news conference on Friday he would not oppose a grand European project if all the firms wanted it. With satellite talks up in the air, the main points of the Lucent deal have already been finalized and are ready to be announced within days, a source familiar with the matter said. Others said Alcatel's board could meet again over the weekend. Alcatel will acquire Lucent without paying a premium. Based on current share prices, Alcatel shareholders will have 62 percent of a combination worth $36 billion. The group is expected to be based in Paris and incorporated under French law. There will be parity between the two companies on the group's supervisory board with an important number of independent U.S. non-executive directors. Serge Tchuruk, executive chairman at Alcatel, will be non-executive chairman of the new group, with extended powers. Lucent's Patricia Russo will be the managing director at Alcatel-Lucent with Alcatel's Mike Quigley serving in the No. 2 spot, sources close to the talks said. |
