Who’s buying whom?! French Alcatel and US’ Lucent to merge
With Alcatel owning 60 % and Lucent - 40 % of the new company and with Patricia Russo - an American who can’t speak French – ruling Alcatel-Lucent mélange, this weird merger looks like Germany at a reduced scale, where more than half of the parliament speaks with Putin’s voice, heading left, while on the other side American-backed chancellor Merkel does anything in her power to brake any leftist progress, heading right at any expense.
I wonder what kind of real business advantage does this deal offer to Alcatel?
Which is American Russo’s role there, other than to destroy the French legendary telecommunications company Alcatel?
On the other hand, while General Motors allegedly struggles between life and death, announcing stake sale, it plans to boost car output in Russia, being on its way to build its first factory there.
~Vera
~Vera
See the articles related to this topic at the link below:
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| Alcatel to buy
Lucent Sudip Kar-Gupta and Jessica Hall APRIL 03, 2006 | ||||||||||||||
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| FRENCH communications-equipment maker Alcatel will buy smaller US rival Lucent Technologies for $US13.4 billion ($18.7 billion) to gain market heft and broaden its product mix. Together, the companies would have total revenue of $US25 billion, roughly matching current industry leader Cisco Systems. They would also wield greater clout to negotiate prices with customers and enjoy a broader research and development base. "Competition is increasing and size and scale really matter," Lucent chief executive Patricia Russo told analysts and
reporters on a conference call, adding that the prospect of joining the companies' research and development muscle helped to cinch the deal. Ms Russo, 53, will serve as chief executive of the combined Paris-based company, although she does not speak French. The transaction, which analysts said could trigger other mergers throughout the equipment sector, comes five years after Lucent and Alcatel first discussed a merger. Talks broke down in 2001 after Lucent balked at the idea of a takeover, rather than a so-called "merger of equals".
Alcatel would now own 60 per cent of the combined company, whose name has yet to be determined. It expects the deal to boost earnings per share in the first year, excluding restructuring charges. The companies plan to cut about 10 per cent of their combined work force, or about 8800 jobs. Alcatel chairman and chief executive Serge Tchuruk would become non-executive chairman. "The question for Alcatel/Lucent is, can they put this company together without a lot of integration risks?" UBS analyst Nikos Theodosopoulos said. With the deal, Lucent would gain a stronger partner after struggling to cut costs and restructure following the loss of business after the burst of the internet bubble, analysts said. Alcatel, which has expertise in digital subscriber line (DSL) technology, would gain Lucent's experience in wireless technology and contracts with big carriers. Alcatel also gets Bell Labs, Lucent's research arm, which is responsible for technological inventions ranging from transistors and lasers to mobile telephone technology, data networking and communications satellites. The companies expect the deal to close in six to 12 months, but analysts said the French and US governments were likely to scrutinise the structure of the transaction to ensure that each firm's sensitive military contracts were protected. Lucent said it would create an independent unit that would run some US government work. The subsidiary would be separately managed by a board composed of three US citizens "acceptable to the US government," Ms Russo said. Analysts said exactly what would go into that subsidiary was likely to be open for debate, as well as a review by the Committee on Foreign Investment in the United States (CFIUS), which must clear foreign acquisitions of US companies. Lucent's US government work has included an advanced communications system for the Defence Advanced Research Projects Agency, the Pentagon's
technology incubator. "I don't think there's any rational reason for anyone to oppose this deal. But rationality and politics are two different things. It doesn't mean that this deal doesn't become a political football," said Stephen Kamman, an analyst with CIBC World Markets. Several recent deals with international companies have raised national security concerns in the US. Most recently, state owned Arab company Dubai Ports World agreed to transfer operation of six US port terminals to a US entity to defuse a political firestorm. Under the terms of the deal, Lucent shareholders will receive 0.1952 of an ADS (American Depositary Share) of Alcatel for every common share of Lucent
that they currently hold. The deal values Lucent at about $US3.01 per share, or slightly below its closing stock price of $US3.05 on the New York Stock Exchange Friday. Despite that discount, Lucent chief financial officer John Kritzmacher called the deal "fair and equitable". The price reflects a 6.7 per cent premium over the price of Lucent's stock before news of the merger talks first emerged 10 days ago. The price also values Lucent at about 17 times projected earnings, which is below the industry average of about 22 times. Analysts said the deal could force rivals to add more sales staff, revamp their product lines or consider mergers as a way to cut costs. "I think everybody's thinking about what they want to do when they grow up," CIBC's Mr Kamman said. "This is going to drive some more soul-searching." The Alcatel-Lucent deal has been partly complicated by Alcatel's desire to transfer its satellite unit to France's Thales SA in exchange for a larger stake in Europe's biggest defence electronics company. The move is aimed placing Alcatel's sensitive civil and military satellite projects under control of a French entity. | ||||||||||||||
Alcatel, Lucent Shares Up on Merger News
By LAURENCE FROST AP Business Writer
© 2006 The Associated Press
© 2006 The Associated Press
PARIS — Shares in Alcatel SA and Lucent Technologies Inc. posted gains Monday as investors welcomed the French telecom equipment maker's acquisition of its U.S. rival in a euro11.1 billion (US$13.4 billion) stock swap.
Shares in Alcatel ended 4.8 percent higher at euro13.38 (US$16.20) in Paris. Lucent shares were up 1.6 percent at US$3.10 (euro2.56) in New
York.
Analysts have praised the logic of the deal announced Sunday, which will create a new trans-Atlantic powerhouse in a consolidating
telecommunications industry. It will have annual sales of euro21 billion (US$25 billion) _ ahead of LM Ericsson's euro16.4 billion (US$19.9 billion) _ and an 18 percent share of the global market for telecoms gear.
"The newly formed company will be a key player in several key telecom markets," including services and wireless network equipment, Prudential Equity Group analyst Inder Singh wrote in a research note.
The combined business, to be based in Paris, will work to capitalize on fast-growing offerings such as "triple-play" Internet, phone and TV packages that have become popular in the telecom field, Alcatel and Lucent said. The companies have also pledged euro1.4 billion (US$1.7 billion) in merger-related savings within three years, driven in part by the planned
shedding of 8,800 jobs _ or 10 percent of the combined global head count.
Lucent Chief Executive Patricia Russo, who will head the new company, and Alcatel Chairman and CEO Serge Tchuruk _ who stays on as non-executive chairman _ declined to say Monday where or when the jobs would be cut.
"We're not in a position to share what the specific details are of that yet, as they're not finalized," Russo told a news conference with Tchuruk in Paris. "As they are, we will share them."
The new Alcatel-Lucent will be better equipped to weather intense competition in the telecom equipment market and pricing pressures from larger
telecom service providers emerging from a new wave of consolidation, analysts say.
In the past year, the former SBC Communications bought AT&T and Verizon acquired MCI. Last month, the new AT&T Inc. also proposed a US$67 billion (euro55.35 billion) deal for BellSouth Corp.
Alcatel and New Jersey-based Lucent had tried to merge once before, but talks ended without a deal in 2001.
The two companies have sought to placate U.S. and French government security concerns by spinning off their sensitive military technologies to independently supervised subsidiaries.
Lucent announced on Monday the members of a planned three-person board to head the subsidiary that will house Bell Labs, the research arm that does work for the Pentagon. The three are: William Perry, former U.S. secretary of defense; former CIA Chief James Woolsey; and Kenneth Minihan, a former director of the National Security Agency.
Attempts to find a similar solution for Alcatel's satellite businesses had earlier appeared to delay progress with Lucent. French President Jacques Chirac reportedly intervened last week to insist that Alcatel and defense electronics company Thales SA should include European Aeronautic Defence and Space Co. in any satellite deal.
Under a plan negotiated over several months, Alcatel would have transferred its satellites
to Thales, increasing its stake in the Paris-based company to about 25 percent from the current 9.5 percent in return. But Thales spokesman Markus Leutert said Monday that the company's board will also consider "scenarios with EADS" when it meets Tuesday.
Russo now faces the challenge of integrating the two work forces and company cultures while managing the necessary job cuts _ amid a resurgence of protectionism in Europe that is often blamed on France's avowed policy of "economic patriotism."
Responding to reporters' questions, Russo said Monday that she had never lived abroad but had traveled widely in her time as Lucent CEO.
"I feel fine about leading a
company that's headquartered in Paris," she said. "I think of it as a global company."
| Nortel could buy, or be bought, after Alcatel deal Mon Apr 3, 2006 10:45 AM EDT |
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TORONTO (Reuters) - Nortel Networks Corp., one of the world's largest telecommunication equipment vendors, could be the next to buy or be bought after the tie-up announced this weekend between Alcatel and Lucent Technologies, analyst said on Monday.
French communications equipment maker Alcatel said on Sunday it would buy Lucent in a deal that creates a company to rival industry leader Cisco Systems Inc..
"We believe the geographic exposure of the combined Alcatel/Lucent represents an attractive aspect that other vendors may wish to emulate with other deals," said Prudential Financial analyst Inder Singh.
"In this light, it appears that Nortel may become more attractive as a target for other European vendors."
Prices for network gear have fallen as suppliers vie for business in a shrinking pool of customers, and companies such as China's Huawei Technologies Co. and ZTE Corp. offer steep discounts.
Merriman Curhan Ford analysts focused on Nortel as "the best value in the space and most likely to be the next player."
They said Nortel could be a buyer, a seller, or remain as a standalone, although that was unlikely. "Given the changing environment we view major strategic activity at Nortel as a near certainty," they added.
The Merriman analysts said Nortel would most likely benefit from a combination with Siemens, a deal that would make it the world's largest networking equipment supplier, and surpass the new Alcatel as the world leader in wireline, with market-leading positions in optical
and VoIP.
Merriman said Motorola would also be an attractive addition to Nortel's wireless unit, and would potentially add wireline access capability as well if Motorola could be coaxed to part with it.
But Fitch Ratings, which also sees an acquisition flurry after the Alcatel/Lucent deal, said a tie up between Nortel and Siemens' communication's unit would be "quite challenging" given Nortel's weak credit profile and mixed results from the Siemen's unit.
Nortel shares were up 5
Canadian cents at C$3.62 on the Toronto Stock Exchange on Monday morning and up 4 cents at $3.09 in New York.
© Reuters 2006. All Rights Reserved.
| Apr 03, 2006 | |||
| Lucent, Alcatel: Now Comes the Hard Part | |||
| APR 03, 2006 11:45:52 AM Add Comment (0) | Permalink | |||
Now that Lucent Technologies and Alcatel have reached a definitive merger agreement, the two companies have their work cut out for them over the next year or so to make the deal work, according to one analyst. "On paper, there is a good strategic fit between these two companies," said Bertrand Bidaud, vice president of carrier operations and strategy at Gartner. "The challenge, as always, is execution." Lucent and Alcatel agreed to a merger of equals on Sunday after more than a week of talks. Once the deal goes through, Alcatel shareholders will hold about 60 percent of the new company, which has combined annual revenue of 21 billion euros (US$25 billion), based on the most recent financial results. Lucent shareholders will hold the remaining 40 percent of the combined company’s shares. Slow growth in demand for telecommunication equipment and increased competition from
low-cost vendors, such as China’s Huawei Technologies and ZTE, have made life difficult for both Lucent and Alcatel in recent years. "Both companies had to do something, and this deal is probably the best they can do," Bidaud said. The merger gives Lucent and Alcatel increased scale, with a strong presence in every major market. The enlarged company now needs to formulate a strategy that uses that scale to its advantage, Bidaud said. That means developing closer partnerships with top operators and playing a more strategic role in helping them revamp and expand their networks, he said. "They need to get out of competition on a deal-to-deal basis," Bidaud said, noting that this market, characterized by low margins, is where low-cost vendors
often do best. The combined company also needs to put more emphasis on R&D for each of its product lines. "They can invest more," he said. Making the merger work will take time and effort. Given the size and different corporate cultures of Alcatel and Lucent, Bidaud expects the integration process to occupy the attention of senior managers for the next year. "Two to three years down the road, we’ll be able to determine if the merger is a success," he said. -Sumner Lemon, IDG News Service | | ||
CORRECTED - UPDATE 4-Alcatel says Lucent cost savings may top $1.7 bln
Monday 3 April 2006, 1:15pm EST
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In Paris item "UPDATE 4-Alcatel says Lucent cost savings may top $1.7 bln" please read in paragraph 3 "...said Tchuruk, 68"
(corrects age)
A corrected story follows:
By Astrid Wendlandt
PARIS, April 3 (Reuters) - Cost savings from the planned purchase by France's Alcatel of U.S. telecoms equipment provider Lucent could exceed the $1.7 billion identified so far, Alcatel head Serge Tchuruk told a news conference on Monday.
Alcatel (CGEP.PA: Quote, Profile, Research) shares climbed to a year high of 13.82 euros after the company unveiled its acquisition of smaller Lucent Technologies (LU.N: Quote, Profile, Research) for $13.4 billion to boost the pair's clout in a consolidating market.
"Cost synergies have been calculated in very cautious way. We've been very conservative," said Tchuruk, 68, who said he has offered to stay on for a few more months after his June retirement date until the merger closes. He will become non-executive chairman of the new firm after the deal is signed.
By 1405 GMT the French telecom equipment firm's shares were up 5 percent at 13.41 euros, after it gave a cost savings target that was larger than analysts had expected, most of which will be achieved within two years. Lucent (LU.DE: Quote, Profile, Research) shares were also up 1.59
percent in Frankfurt and 1.31 percent in New York.
The two companies plan to cut about 10 percent of their combined workforce, or about 8,800 jobs, even though Tchuruk said the two companies had few duplications.
"There is no overlap between the two companies, and we don't find ourselves in a situation where will be forced to carry out massive lay-offs," he said, adding he had a "huge" list of potential cost savings, including purchasing and computer systems.
Lucent CEO Pat Russo, 53, the
designate first CEO of the Paris-based combined company which will be the biggest telecoms equipment maker in the world, added that more synergies may come from additional revenues as a result of the combination.
"There are revenue synergies, driven by cross-selling opportunities. While we have not quantified them, there are revenue synergies that provide upside to this perspective."
Together, the pair would have total revenue of $25 billion, roughly matching industry leader Cisco Systems Inc. (CSCO.O: Quote, Profile, Research), with little overlap in their different mobile and fixed line communication technologies around the world.
"It's a combination one only dreams about," Russo said.
SYNERGIES HIGHER
Alcatel, which together with Lucent announced the deal on Sunday, is to own 60 percent of the combined group and expects the acquisition
to boost earnings per share in the first year, excluding restructuring charges.
Societe Generale maintained its "buy" rating on Alcatel.
"The details released over the weekend actually help the investment case as the yearly synergies identified by the management at 1.4 billion euros ($1.7 billion) are far in excess of those expected by the market, supporting a value of over 16 euros per share for the enlarged entity," said the bank.
A combined company would be better able to afford research
and development (R&D), Tchuruk said.
"Our reason of being is to innovate. Probably our biggest costs are in R&D. It is the same for pharmaceutical companies when they merge. It automatically increases their ability to increase R&D, which is exactly what we're doing," he said.
The combined company will have an R&D budget of around $2.9 billion.
"The downturn in 2002 to 2004 is still being felt with significantly reduced R&D. With fewer customers operating fewer systems,
suppliers are in a scale race: complete solution deployment, R&D investment and customer reach," said Simon Pearson, transaction advisory director at Ernst & Young.
The transaction, which analysts said could trigger other mergers throughout the equipment sector, comes five years after Lucent and Alcatel first discussed a merger. Talks broke down in 2001 after Lucent balked at the idea of a takeover, rather than a so-called merger of equals.
"Alcatel and Lucent is not a new idea. Five years ago we were on the verge of concluding such merger. At the very last minute we decided to wait. But the basic reasoning has not changed. The two companies are
highly complementary," Tchuruk said.
CAUTION
While welcoming the deal overall, some analysts expressed caution. "Lucent has been struggling for years to improve its profitability with little success," Nomura said in a note on Monday. "We see significant risk of a merger that ends up destroying value."
Alcatel, which has expertise in high-speed digital subscriber line (DSL) technology, would gain Lucent's dominance in wireless technology and contracts with big carriers such as Verizon
Communications (VZ.N: Quote, Profile, Research).
Alcatel also gets Bell Labs, Lucent's historic research arm, which is responsible for inventions ranging from transistors and lasers to cellular telephone technology, data networking and communications satellites.
The companies expect the deal to close in six to 12 months, but analysts
said the French and U.S. governments will likely scrutinise the structure of the transaction to ensure that each firm's sensitive military contracts are protected.
However, Tchuruk told Le Monde the French government had not taken a stance on the merger.
"In the last few days, I have had discussions with the French public authorities. They told me: 'It's your business and that of your administrative board'. I did not feel any reticence. Quite the contrary," Tchuruk told the French daily.
Under the terms of the deal, Lucent shareholders will receive 0.1952 of an ADS (American Depositary Share) of Alcatel for every common share of Lucent that they hold.
The deal values Lucent at about $3.01 per share, or slightly below its closing stock price of $3.05 on the New York Stock Exchange Friday. This values Lucent at about 17 times projected earnings, which is below the industry average of about 22 times.
Credit rating agency Moody's said on Monday it had put the Ba1 long term debt ratings of Alcatel on review for a possible downgrade, but Alcatel predicted it would become investment grade once the cost savings kicked
in and cash flow improved.
(Additional reporting by Lucas van Grinsven)
Paris shares close sharply higher, led by Alcatel as M&A boom continues UPDATE
04.03.2006, 02:07 PM
04.03.2006, 02:07 PM
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(Updates with full report)
PARIS (AFX) - Share prices closed sharply higher, lifted to a fresh high since July 2001 as the surge in corporate merger and acquisition activity continues, with Alcatel the latest example after it confirmed a plan to merge with Lucent Technologies, dealers said.
The CAC-40 index finished up 34.41 points or 0.7 pct at 5,255.26, on volume of 4.7 bln euro.
Among CAC-40 stocks, 31 closed higher, 7 closed lower and 2 ended unchanged. On the Matif, April CAC-40 futures were trading 39.5 points firmer at 5,257.5.
On the broader indices, the SBF-80 index closed up 58.21 points at 6,119.81 and the SBF-120 rose 26.87 to 3,819.01.
The euro stood at 1.2131 usd compared with 1.2141 usd late on Friday.
Alcatel's shares soared to close up 0.61 eur or 4.78 pct at 13.38. After it reached the merger agreement with Lucent, its stock was upgraded to 'buy' from 'hold' at ABN Amro, while Exane BNP analysts raised their target price for the shares to 18 eur from 15.
Lucent will become an Alcatel subsidiary, with each Lucent common share being replaced by 0.1952 of an American Depository Share (ADS) representing an ordinary Alcatel share. Alcatel shareholders will own about 60 pct of the merged company and Lucent shareholders will own about 40 pct.
A dealer at a major European brokerage said the forecasts for the merged entity, including 1.4 bln eur of savings and EPS of 1.23 eur by 2008, were higher than initially expected. Fitch Ratings placed Lucent's ratings on 'rating watch positive' and Alcatel's ratings on 'rating watch negative' which it said reflects the possibility of a downgrade of Alcatel's long-term issuer default rating in the light of a more highly geared balance sheet.
In the wake of this deal, Alcatel is hoping this week to announce a partnership with defence electronics group Thales involving their satellite operations. Thales shares finished up 0.570 eur or 1.55 pct to 37.26.
The French government is seeking the participation of EADS in any Alcatel-Thales satellite tie-up. EADS shares rose 0.25 eur or 0.72 pct to 35.02.
Electricite de France added 1.85 eur or 3.95 pct to gains made in previous sessions to close at 48.08. Chief executive Pierre Gadonneix told German daily Handelsblatt that he is interested in acquiring the Belgian assets of Suez and Gaz de France if they are required to be sold as part of their merger.
EDF shares also benefited from an upgrade to 'buy' from 'neutral' by UBS, as the Swiss broker said there is now increased visibility on electricity tariffs, while lifting its target price to 60 eur from 41.
Gaz de France gained 0.16 eur or 0.54 pct to finish at 30.00, while Suez finished down 0.03 eur or 0.09 pct at 32.49.
Lafarge gained 2.85 eur or 3.05 pct to close at 96.35 amid expectations it will extend its offer for minority shares in its North America unit. The stock added to gains made last week after Belgian financier Albert Frere announced he had raised his stake in the group to 8.1 pct from 6.5 pct via his GBL investment vehicle.
Peugeot rose 1.05 eur or 2.02 pct to 77.20. Registrations of the group's cars in France were up 0.7 pct in March, while Peugeot announced plans to build a second assembly plant in China with local partner Dongfeng Motor Group to take advantage of the booming demand for cars there. The stock was downgraded to 'underperform' from 'neutral' by Exane BNP Paribas analysts.
Renault was up 0.65 eur or 0.74 pct to 88.40. Registrations of Renault group cars in France fell 13.3 pct in March, with Renault models themselves down 16.5 pct, but Korean unit Renault Samsung Motors Co said March car sales were at a record 13,422 units, up 29.5 pct year-on-year, supported by solid domestic sales and rising exports.
Total gained 2.30 eur or 1.06 pct to 220.00 as the sector rose on the back of high oil prices. Also, Total and Swiss oil group Eni have refused to put their Venezuelan oil production operations into joint ventures with PDVSA where the state-owned company would have a blocking majority, according to Venezuelan press reports.
BNP Paribas closed up 0.65 eur or 0.85 pct at 77.30. In an interview with the Financial Times, chief executive Baudouin Prot ruled out a merger with French rival Societe Generale, preferring to focus its expansion plans on the US, Europe and emerging markets. Societe Generale dropped 0.10 eur or 0.08 pct to 124.00.
Vinci was the main decliner of the day, dropping 1.20 eur or 1.48 pct to close at 80.15, amid its offer to buy the remaining 26.6 pct minority shares in Autoroutes du Sud de la France which will run until April 28.
Capgemini slipped 0.42 eur or 0.93 pct to 44.54 after closing at a 52-week high on Friday.
Among second-liners, Altran Technologies surged 1.33 eur or 11.80 pct to close at 12.60. It lifted its cost-cutting forecasts and reported solid full year margins, which prompted Oddo analysts to repeat their 'buy' recommendation.
Euronext lost 1.30 eur or 1.91 pct at 66.75, after it said it is prepared to continue merger talks with Deutsche Boerse AG after the German exchange expressed its recognition that a merger with Euronext is its best possible approach for creating a truly European exchange. Euronext will consult shareholders at its annual general meeting on May 23 before acting on any Deutsche Boerse merger.
PARIS (AFX) - Share prices closed sharply higher, lifted to a fresh high since July 2001 as the surge in corporate merger and acquisition activity continues, with Alcatel the latest example after it confirmed a plan to merge with Lucent Technologies, dealers said.
The CAC-40 index finished up 34.41 points or 0.7 pct at 5,255.26, on volume of 4.7 bln euro.
Among CAC-40 stocks, 31 closed higher, 7 closed lower and 2 ended unchanged. On the Matif, April CAC-40 futures were trading 39.5 points firmer at 5,257.5.
On the broader indices, the SBF-80 index closed up 58.21 points at 6,119.81 and the SBF-120 rose 26.87 to 3,819.01.
The euro stood at 1.2131 usd compared with 1.2141 usd late on Friday.
Alcatel's shares soared to close up 0.61 eur or 4.78 pct at 13.38. After it reached the merger agreement with Lucent, its stock was upgraded to 'buy' from 'hold' at ABN Amro, while Exane BNP analysts raised their target price for the shares to 18 eur from 15.
Lucent will become an Alcatel subsidiary, with each Lucent common share being replaced by 0.1952 of an American Depository Share (ADS) representing an ordinary Alcatel share. Alcatel shareholders will own about 60 pct of the merged company and Lucent shareholders will own about 40 pct.
A dealer at a major European brokerage said the forecasts for the merged entity, including 1.4 bln eur of savings and EPS of 1.23 eur by 2008, were higher than initially expected. Fitch Ratings placed Lucent's ratings on 'rating watch positive' and Alcatel's ratings on 'rating watch negative' which it said reflects the possibility of a downgrade of Alcatel's long-term issuer default rating in the light of a more highly geared balance sheet.
In the wake of this deal, Alcatel is hoping this week to announce a partnership with defence electronics group Thales involving their satellite operations. Thales shares finished up 0.570 eur or 1.55 pct to 37.26.
The French government is seeking the participation of EADS in any Alcatel-Thales satellite tie-up. EADS shares rose 0.25 eur or 0.72 pct to 35.02.
Electricite de France added 1.85 eur or 3.95 pct to gains made in previous sessions to close at 48.08. Chief executive Pierre Gadonneix told German daily Handelsblatt that he is interested in acquiring the Belgian assets of Suez and Gaz de France if they are required to be sold as part of their merger.
EDF shares also benefited from an upgrade to 'buy' from 'neutral' by UBS, as the Swiss broker said there is now increased visibility on electricity tariffs, while lifting its target price to 60 eur from 41.
Gaz de France gained 0.16 eur or 0.54 pct to finish at 30.00, while Suez finished down 0.03 eur or 0.09 pct at 32.49.
Lafarge gained 2.85 eur or 3.05 pct to close at 96.35 amid expectations it will extend its offer for minority shares in its North America unit. The stock added to gains made last week after Belgian financier Albert Frere announced he had raised his stake in the group to 8.1 pct from 6.5 pct via his GBL investment vehicle.
Peugeot rose 1.05 eur or 2.02 pct to 77.20. Registrations of the group's cars in France were up 0.7 pct in March, while Peugeot announced plans to build a second assembly plant in China with local partner Dongfeng Motor Group to take advantage of the booming demand for cars there. The stock was downgraded to 'underperform' from 'neutral' by Exane BNP Paribas analysts.
Renault was up 0.65 eur or 0.74 pct to 88.40. Registrations of Renault group cars in France fell 13.3 pct in March, with Renault models themselves down 16.5 pct, but Korean unit Renault Samsung Motors Co said March car sales were at a record 13,422 units, up 29.5 pct year-on-year, supported by solid domestic sales and rising exports.
Total gained 2.30 eur or 1.06 pct to 220.00 as the sector rose on the back of high oil prices. Also, Total and Swiss oil group Eni have refused to put their Venezuelan oil production operations into joint ventures with PDVSA where the state-owned company would have a blocking majority, according to Venezuelan press reports.
BNP Paribas closed up 0.65 eur or 0.85 pct at 77.30. In an interview with the Financial Times, chief executive Baudouin Prot ruled out a merger with French rival Societe Generale, preferring to focus its expansion plans on the US, Europe and emerging markets. Societe Generale dropped 0.10 eur or 0.08 pct to 124.00.
Vinci was the main decliner of the day, dropping 1.20 eur or 1.48 pct to close at 80.15, amid its offer to buy the remaining 26.6 pct minority shares in Autoroutes du Sud de la France which will run until April 28.
Capgemini slipped 0.42 eur or 0.93 pct to 44.54 after closing at a 52-week high on Friday.
Among second-liners, Altran Technologies surged 1.33 eur or 11.80 pct to close at 12.60. It lifted its cost-cutting forecasts and reported solid full year margins, which prompted Oddo analysts to repeat their 'buy' recommendation.
Euronext lost 1.30 eur or 1.91 pct at 66.75, after it said it is prepared to continue merger talks with Deutsche Boerse AG after the German exchange expressed its recognition that a merger with Euronext is its best possible approach for creating a truly European exchange. Euronext will consult shareholders at its annual general meeting on May 23 before acting on any Deutsche Boerse merger.
| Alcatel reveals synergy savings and jobcuts from Lucent merger Details of Alcatel's purchase of its smaller US rival Lucent Technologies have been revealed at a Paris news conference. It included confirmation that nearly 9,000 people are to lose their jobs. Alcatel's chief executive, Serge Tchuruk, who will become the company's chairman, told reporters: "This is an historic moment for our two companies but also - I think -for the telecommunications industry, because we've put together the world's number one creator of communication solutions." By buying Lucent, Alcatel becomes the biggest telecoms equipment maker in the world. It will overtake Cisco in terms of revenue. Last year the two merging companies combined had sales worth 21 billion euros. It has not yet been revealed what the new company will be called. It will be headquartered in Paris and the new chief executive will be the current head of Lucent, Patricia Russo. The company plans major jobs cuts, around 10% of the 88,000 workforce. That is a sensitive subject in France where unemployment is twice as high as it is the US and Russo said: "We recognised the sensitivity that this creates to the employees of both companies and we will be very fair, and balanced and caring in how we approach this." Russo said she aims to save 1.4 billion euros after three years through synergies and Alcatel's head Serge Tchuruk said the saving could exceed that. The merged firms believe they will be in a better position to negotiate prices with customers, as well as having stronger research and development capacity. |
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The on-again, off-again merger talks between Alcatel and its troubled U.S. rival Lucent Technologies seems to have awoken from a five-year slumber.
After lawsuits, federal investigations and lowered earnings, the Murray Hill, N.J. Lucent has a chance that won't likely come again, according to analysts.
In hiatus since 2001 when another proposed merger between the French and U.S. telecommunications equipment makers fell through, Lucent today said the companies are talking again.
"We can confirm that Lucent and Alcatel are engaged in discussions about a potential merger of equals that is intended to be priced at market," Lucent said in a statement.
The key phrase is "merger of equals." The 2001 proposed merger fell apart after Lucent saw itself as being acquired by the larger Alcatel. The same stumbling block could reoccur, say some while other experts see the agreement as inevitable.
"I wouldn't be surprised if we don't see a handshake before the weekend is over," said Jay Pulz, a Gartner analyst. Today's confirmation by the two companies is a sure sign talks are in the advanced stages.
Lucent spokesperson Mary Lou Ambrus refused to comment on how long the negotiations have been ongoing or when an announcement would be made. Both Lucent and Alcatel cautioned that no agreement is assured.
"It makes a lot more sense for it to happen now," Juan Fernandez, a Gartner analyst, said. As the recent AT&T, Bell South pact illustrates, the telecom industry is in the mood to merge. The writing is on
the wall and the pool of available companies is shrinking, he said.
"The opportunity is not going to come up again" for Lucent.
The company has suffered a string of losses. In January, it told investors it expects lower revenues for the first quarter of 2006. Annual revenue would be flat or see only a slight increase, internetnews.com previously reported.
A month earlier, Lucent was ordered to pay $244 million, after Winstar Communications took the telecom giant into bankruptcy court charging
Lucent had breached a partnership agreement.
In 2003 Bob Holder, Lucent's COO during the 2001 merger attempt, was replaced by Patricia Russo.
Lucent is now in better shape than in 2001, and a merger could further revive the company, allowing it to explore more profitable areas, according to Pulz. Spun off from AT&T in 1996, the company has seen its legacy business decline.
For Alcatel, a merger could give it a greater U.S. presence, said Pulz. While Alcatel is strong in ADSL, Lucent provides access to the Baby Bells and CDMA. A stronger Alcatel could also compete with Cisco for VoIP or triple-play business, Pulz said.
But the merger is not a fait accompli.
"Mergers of equal partners are rare and difficult to carry out," said Fernandez, who is unsure if this possible merger is also headed for failure.
For a merger of equals to occur, the two companies must totally synchronize operations and agree on difficult issues, such as
workforce layoffs.
While Lucent could become a U.S. based Alcatel subsidiary, saving face for the company, the American telecom firm holds military contracts, reviving fears that French-based Alcatel could witness the same opposition seen when Dubai Ports International attempted to manage U.S.-based ports, Pulz said.
But at least one report indicates the headquarters will be in France. Lucent and Alcatel have agreed to the parameters of a merger, according to the Reuter's Web site quoting sources it said are familiar with the talks. New details in the report state the new combined
entity will be headquartered in France, and that Alcatel plans to hold onto its 10% stake in European defense electronics contractor Thales.
Reached this afternoon, Lucent's Ambrus told internetnews.com that the company will still not comment beyond the statement released earlier.
Joseph Laszlo, a telecom analyst with Jupiter Research, says the proposed deal makes sense.
"There's some overlap but their product lines seem to be complimentary," he said.
Laszlo also said the main challenge for the new combined company will how quickly they are able to provide
their customers with the infrastructure for the IPTV and video services. Jupiter Research is owned by the same company as internetnews.com.
Michael Hickins contributing to this story. The update includes further analysis and the report the company will be based in France.
| General Motors to sell finance arm for USD 8 billion: Report |
| |
| Washington, Apr 03: Struggling US automaker General Motors Corp will sell its profitable finance arm, General Motors Acceptance Corp, to private investors led by Cerebrus Capital Management in an eight billion dollar deal, the Wall Street Journal reported on its website. The deal, which would see gm dispose of its most profitable unit in order to improve its financial position, is expected to be announced in detroit today, the newspaper said yesterday. The deal will generate about 14 billion dollars in total cash benefits for GM, the report said, after the monetization of other assets and adjustments are made that will transfer additional financial value to GM. The journal said the deal was a "victory" for GM Chief Executive Rick Wagoner who has been given the task of reviving the world's biggest auto firm which has massive debts. But it added, the fact that gm had been forced to sell its most profitable arm which it said generated about three billion dollars in profit last year "reveals just how parlous GM's financial state has become." The sale of GMAC is latest move in the us auto giant's efforts to overcome falling sales and market share which, coupled with the runaway cost of health care for workers, contributed to a 10.6 billion dollar loss in 2005. On Friday the company said that a us federal court has approved a deal with the auto workers union to slash GM's health care bills. The deal reached with the united auto workers is expected to generate about three billion dollars in accrued savings every year, including one billion dollars in cash savings. Bureau Report |
April 03, 2006 03:09 PM ET
GM to Sell 51 Pct. Stake in GMAC for
$14B
"In the context of history, the last six months are going to prove to be pivotal," Wagoner said at a
news conference. "This is about restructuring our business so we can be robustly profitable in the future, so we're not so balanced on a razor's edge (that) if gas prices go up, you don't make any money, if your sales go down 10 percent you don't make (any money)."
But GM's shares sank more than 3 percent after the announcement as analysts questioned weherher the cash infusion would have a lasting impact on GM's outlook and major credit ratings agencies indicated the deal may not lead to an investment-grade rating for the finance arm.
GM shares lost 78 cents, or 3.7 percent, to $20.49 in afternoon trading on the New York Stock Exchange.
The automaker has announced plans to cut 30,000 U.S. hourly jobs and close 12 plants by 2008. As part of that plan, it recently offered buyouts to 113,000 hourly workers.
It also has agreed to bankroll early-retirement buyouts at Delphi Corp., its former parts division and major supplier. Up to 17,000 hourly workers at Delphi could be eligible for a $35,000 payment to retire. GM, Delphi and its unions also are negotiating a settlement on wage cuts that could cost GM up to $12 billion.
The company announced it intended to sell the stake in GMAC last fall, and analysts had predicted a 51 percent share would command between $11 and $15 billion. GM expects to receive about $14 billion over the next three years from the GMAC
deal. The stake is being purchased by a consortium of investors led by Cerberus Capital Management LP, a private investment firm. The group also includes Citigroup Inc. and Aozora Bank Ltd. The sale is expected to be completed in the fourth quarter of 2006.
Morgan Stanley analyst Jonathan Steinmetz said GM appears to be hoarding cash so it can fund buyouts, offer cash to the United Auto Workers in exchange for benefit cuts or weather a future strike. But he said the company needs to provide more details on exactly how it plans to spend the money and why it's worth the earnings power GM gets from GMAC. GMAC paid GM a $2.5 billion dividend last year.
"GM has shrunk or divested `good' assets in the past to redeploy into its auto business or fund
legacy liabilities, only to repeat the cycle a few years later," Steinmetz said in a note to investors. He said investors should keep a close eye on whether GM can improve its U.S. market share -- which is now below 25 percent -- and control its legacy costs.
Wagoner pointed to recent achievements in cutting costs, including a deal with the UAW that requires retirees to shoulder more of their health care costs. That deal was approved Friday by a federal judge and is expected to save GM $1 billion annually after taxes. GM also recently sold a 17 percent share in Suzuki Motor Corp. for $2 billion and is exploring the sale of its 7.9 percent stake in Isuzu Motors Ltd.
"(GMAC) proceeds add to the already sizable cash balances at GM, which provides
some comfort given the high cash burn rates we see at GM in coming years," said Robert Barry, an auto analyst with Goldman Sachs.
GM will receive $7.4 billion from the consortium at closing and an estimated $2.7 billion cash distribution from GMAC related to the conversion of most of GMAC and its U.S. subsidiaries into limited liability companies.
In addition, GM could get another $4 billion over the next three years from about $20 billion of GMAC automotive lease and retail assets and associated funding that it plans to retain.
In addition to raising cash, GM also was seeking to restore GMAC's debt ratings with the sale.
GMAC's ratings were pulled into junk territory last year as GM struggled with mounting losses. A rating below investment grade makes it harder and more expensive to borrow money.
GMAC Chairman and Chief Executive Eric Feldstein, who will continue to lead the company after the sale, said Monday that "credit rating pressures" had held back the business.
"The consortium's equity ownership in GMAC is expected to delink the GMAC credit rating from that of GM, and as a result we believe GMAC will have much better access to low cost funding," he said at the news conference.
But ratings agencies took no immediate action on Monday's
announcement. Standard & Poor's Ratings Services said if the GMAC transaction is completed as proposed, the division's long-term rating would be raised one notch to BB-plus. That is still one notch below investment grade.
Moody's Investors Service said the change in ownership won't immediately affect GMAC's Ba1 rating, the agency's highest non-investment grade rating. Moody's said problems at GM will continue to impact GMAC, and that it may even lower GMAC's credit rating one notch.
Fitch Ratings placed GMAC on a watch with positive implications, but also warned that GM's troubles could continue to hurt GMAC's rating.
Himanshu Patel, an auto analyst with JPMorgan Chase & Co., said credit agencies should take comfort that GMAC's new board isn't GM-controlled. Cerberus will have six seats, while GM will have four and three will be independent. He also said GM is retaining existing leases, which carry the most risk if GM seeks bankruptcy protection.
"We think this deal will at least get a near investment-grade rating, with the potential for future ratings upgrades," Patel said in a note to investors.
Under the terms of the GMAC sale, the division will continue to provide GM and its dealers with the same range of financial products and services. GM will have a 10-year option to acquire GMAC's automotive finance operations under certain
conditions.
Speculation has arisen over Wagoner's future with the company. GM's board, which approved the sale at a special meeting Sunday, used Monday's announcement to reaffirm its support for Wagoner.
"While there is still much work to be done, the GM board has great confidence in Rick Wagoner, his management team and the plan they are implementing to restore the company to profitability," presiding director George Fisher said in a statement.
Wagoner said he was grateful for the vote of confidence.
"I
appreciate support from the board, our workers, my wife -- anybody I can get it from these days," he said.
The next big issue for GM is averting a strike at parts supplier Delphi which could shut down production at the automaker. On Friday, Delphi asked a bankruptcy judge to void its labor agreements, and the UAW said a strike would be inevitable if the judge agrees to it. A hearing is scheduled for May 9, but GM and Delphi have pledged to keep talking until then.
Wagoner said only that he was optimistic about prospects for a deal.
___
AP Auto Writer Dee-Ann Durbin contributed to this report.
General Motors set to boost car output in Russia
Monday 3 April 2006, 7:46am EST
FRANKFURT, April 3 (Reuters) - General Motors (GM.N: Quote, Profile, Research) will expand the number of models assembled under contract in Russia by local partner Avtotor, the world's biggest automaker said on Monday, confirming a newspaper
report.
"We will be announcing shortly additional volume at our Kaliningrad partner.
That additional volume will be for the Hummer and Chevrolet brands," a spokesman for GM Europe said, confirming a story in industry paper Automotive News Europe.
The move means the Avtotor plant will assemble the Hummer H3 sport utility vehicle as well as four Chevrolet models -- the Aveo, Lacetti, Tacuma/Rezzo and Epica -- which it had been importing to Russia from South Korea, the paper said.
The plant already makes the Chevrolet TrailBlazer and Tahoe, Hummer H2 and Cadillac CTS and STS models from kits for GM, Automotive News said.
The paper also said GM was negotiating with several cities to build its first factory in Russia, but the spokesman declined to comment on this. GM already builds the Niva SUV in a joint venture with Russian carmaker AvtoVAZ.
Chevrolet is the number-two foreign brand after South Korea's Hyundai Motor Co Ltd (005380.KS: Quote, Profile, Research) in Russia, whose car market has been expanding quickly as economic growth spurs sales to a broadening middle class.
Sales of new foreign cars rose 60 percent in 2005 to 563,400 units. Auditors Ernst & Young estimate Russia's overall car market rose 14 percent last year to 1.84 million vehicles.
© Reuters 2006. All Rights Reserved.
General Motors May Announce GMAC Stake Sale Today, People Say
April 3 (Bloomberg) -- General Motors Corp., the world's largest automaker, may announce an agreement today to sell control of its finance unit to a group
led by Cerberus Capital Management LP, people with direct knowledge of the matter said.
Cerberus has teamed with investors including Citigroup Inc.'s private-equity unit to buy a majority stake in General Motors Acceptance Corp., according to four people, who declined to be identified before a formal accord is disclosed. An announcement may come as early as this morning, New York time.
A sale would bring GM Chief Executive Officer Rick Wagoner a step closer to reducing the cost of making auto loans by regaining an investment-grade rating for GMAC. GMAC's credit rating, along with its parent's, was cut to junk last year as the automaker reported a $10.6 billion loss. Detroit-based GM is selling assets, firing employees and offering buyouts to union workers to cut losses.
``This is long-awaited good news for bond investors,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``The next question is whether the new unit will have an investment-grade rating.''
The sale may allow GMAC to regain its investment rating if Standard & Poor's, Fitch Ratings and Moody's Investors Service determine the new buyers have a more stable financing capability than GM, which has lost money for five straight quarters.
The ratings companies have given GMAC a higher credit rating than GM since late last year on the expectation of a sale.
GM's board of directors met yesterday to review the bid, according to one of the people.
Funding Help
The group offered about $11 billion in January for 51 percent of GMAC, one of the persons said. The New York Times and Wall Street Journal today put the figure at $8 billion.
Aozora Bank Ltd., owned by Cerberus, and Norinchukin Bank Ltd., a Japanese bank for farm cooperatives, will help fund the GMAC purchase, two people with direct knowledge of the bid said last week.
Citigroup spokesman Jon Diat and Cerberus Chief Operating Officer Mark Neporent didn't return calls seeking comment. GMAC spokeswoman Toni Simonetti wouldn't comment.
GM has made more money
from auto loans and mortgages than from building cars and trucks since 2002. Last year, the auto unit lost $12.9 billion and GMAC earned $2.4 billion, according to revised figures filed by the automaker last week.
GMAC profit fell from a record $2.9 billion in 2004 as operating income from auto loans declined 28 percent last year, primarily from the higher cost to borrow money, according to a GMAC regulatory filing last week.
The 87-year-old finance unit, with total assets of about $321 billion, received $666 million of its net income in 2005 from auto financing, $1.31 billion from mortgages and $417 million from insurance, according to the filings. The company financed leases and loans on 2.16 million cars and trucks worldwide last year. GMAC operates in 39 countries.
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