Alcatel SA and Lucent Technologies Inc. have reached a definitive agreement to merge, they said Sunday.
The merger stands to create a networking giant with revenues of Euro 21 billion (US$25 billion), based on 2005 financial results, and a strong presence in each continent.
The announcement comes a week after the two companies said they were talking about a merger. Analysts speculated that growing competition from Chinese networking vendors like Huawei Technologies Co. Ltd. and ZTE Corp. had pushed the two companies to consider a union.
Under the terms of the agreement Lucent shareholders will receive 0.1952 of an ADS (American Depositary Share) representing ordinary shares of Alcatel for every common share of Lucent that they own, the companies said in a statement. After the merger Alcatel shareholders will hold about 60 percent of the new company with Lucent shareholders accounting for the remaining 40 percent.
The new company will be based in Paris and be headed by Patricia Russo, who is currently chairman and CEO of Lucent. The board of directors will consist Russo, Alcatel Chairman and CEO Serge Tchuruk, 5 other people from each company and 2 independent European directors.
The merger has been agreed by the board of directors of both companies but remains pending agreement from shareholders and regulatory authorities. The companies said they anticipate the deal will close in 6 months to 1 year.