French telecoms equipment group Alcatel said on Sunday it had finalised a deal to buy Lucent Technologies for around $13 billion to strengthen its position in a consolidating market.
The transaction, which will see Alcatel shareholders have the lion's share of the new company, comes amid a wave of consolidation in the telecoms industry and will create a company with combined revenues of around 21 billion euros ($25 billion).
The companies said the deal would result in a 10 percent reduction in their combined global workforce.
"This is an industry where size and scale matter," Patricia Russo, who will be chief executive of the new group, said on a conference call.
The Alcatel/Lucent tie-up had been partly complicated by Alcatel's plans to increase its stake in French defence electronics group Thales - a politically sensitive issue that has involved the German and French governments.
Alcatel said it would continue talks with Thales over possibly increasing its shareholding in the group. Alcatel now has a stake of around 9.5 percent in Thales, while the French government holds around 30 percent of Thales.
Alcatel and Lucent said the deal was a "merger of equals".
However, Alcatel shareholders will own around 60 percent of the new company, with Lucent shareholders owning the rest.
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As part of the deal, 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 currently hold.
This values Alcatel's takeover of Lucent at around $13.4 billion.
Alcatel Chairman and Chief Executive Serge Tchuruk will be non-executive chairman of the new Paris-headquartered company.
A tie-up between Alcatel and Lucent strengthens the ability of both companies to negotiate prices with their telephone company customers, who have led consolidation in the telecoms sector.
Alcatel said it expected its acquisition of Lucent to be accretive to earnings per share (EPS) in the first year.
The transaction terms were thrashed out with the backdrop of a complex battle for French company Thales.
Alcatel said it remained keen on increasing its stake in Thales.
Defence industry sources have said Alcatel hopes to fold its satellite activities into Thales in exchange for a bigger stake in the company. However, European planemaker EADS is also keen for a stake in Thales.
EADS tried to grab control of Thales in 2004 and media reports said French President Jacques Chirac and German Chancellor Angela Merkel backed a three-way deal between EADS, Thales and Alcatel to create a leading European satellite firm.
Lucent said it would create a separate and independent unit to oversee its sensitive contracts with the US government.
Retired workers of Lucent had said that the US government should not approve of the deal with Alcatel, but Lucent said the merger was not contingent on their approval.
Alcatel shares closed down 1.5 percent at 12.77 euros on Friday, while Lucent ended down 1.3 percent at $3.05.
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