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May 18, 2001 [WSJ.com]

Alcatel-Lucent Not Anticompetitive, Though Unlikely



NEW YORK -- Any deal between Lucent Technologies Inc. (LU) and France's Alcatel SA (ALA) would have to overcome internal obstacles, but at least such a combination would probably be safe from antitrust regulators, experts said.

The two telecommunications equipment makers are reportedly in advance talks about a potential combination, according to a story in Friday's New York Times. The newspaper reported that Alcatel could make a bid to buy Lucent, Murray Hill, N.J., for slightly more than $40 billion, almost entirely in stock, or a 20% premium. However, CNBC reported that the deal would more likely be a merger of equals with no price premium, and others have said it's more likely that Alcatel would do better to pursue a strategy of bidding only for Lucent's optical fiber business, which the French company has already admitted an interest in.

Lucent officials Friday declined to comment.

Should a full-blown deal emerge, Garret Rasmussen, an antitrust lawyer at the Washington, D.C., firm Patton Boggs, doesn't think there would be any serious antitrust concerns on the part of U.S. regulators. Indeed, given Lucent's problems, anything that would strengthen its presence in the U.S. would likely be seen as a positive.

"Lucent has experienced considerable trouble recently and its stock has plummeted, and there have been rumors of bankruptcy," he said. "Anything done to revive Lucent would be pro-competitive. Anything that increases Lucent's competitive vigor is pro-competitive."

Furthermore, such a deal would be well-received by the Bush administration, which is perceived to be business friendly. "They will be much more receptive to mergers that lead to significant efficiencies, and I think this is a merger that would lead to significant efficiencies. They have complementary strengths," Rasmussen said.

Alcatel, and its investors, however, may be wary of taking on Lucent, which has posted steep losses, is cash-short and lacks a clear path to recovery. As such, investors may balk paying too steep a price for such a troubled company. In other words, the troubles that Rasmussen refers to as helping to clear any regulatory hurdles are the same ones that might make Alcatel or its shareholders shy away from making an offer.

Nicholas Economides, economics professor at New York University, saw no issues that could derail a deal, but said regulators might push the companies, which both sell traditional network equipment to telecommunications carriers, to sell individual assets in some areas.

Alcatel would use Lucent to gain greater access to the U.S. Canada's Nortel Networks Corp. (NT) and Corning Inc. (GLW), Corning, N.Y., meanwhile, have been dismissed as candidates to buy Lucent, because they are direct competitors in the U.S. market and would present antitrust concerns.

The fact that one party is European could also help smooth any European regulator concerns. "The European Union tends to be a bit 'peculiar,' let's say, with American companies," Economides said, referring to European sensitivities about American encroachment on their territory.

   -Phyllis Plitch, Dow Jones Newswires, 201-938-2357
   -By Riva Richmond, Dow Jones Newswires, 201-938-5670

Briefing Book for: ALA | F.ALC | GLW | LU | NT | T.NT

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