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News > International
Alcatel buys Newbridge
February 23, 2000: 6:19 a.m. ET

French telecom equipment company pays $7.1B for Canadian switch maker
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LONDON (CNNfn) - French telecom equipment maker Alcatel announced Wednesday it would acquire Canadian telecom switching company Newbridge Networks in an all-stock deal valued at $7.1 billion to bolster its capabilities in building the fast data networks that businesses and consumers increasingly depend on.  
    The purchase is the latest of a string of North American acquisitions for Alcatel, the maker of products from cellular handsets to equipment for telephone calls centers. Ontario-based Newbridge specializes in telecom switching gear, and provides network installation, systems integration, and other technology services.
    Behind the purchase is a belief that adding Newbridge's expertise in advanced telecom switches to Alcatel's fast-access equipment will enable the French company to grab a bigger share of equipment orders for so-called broadband wireless networks, which analysts believe are set to become the backbone of data transmission.
    "Alcatel is making a major move to become a worldwide leader in new-generation networks, which will handle the explosive growth of data with the appropriate quality of service," Alcatel Chairman and Chief Executive Serge Tchuruk said in a statement.
    The deal, which has been agreed by both companies' boards, would see the Paris-based company offer 0.81 Alcatel American Depositary Share for each Newbridge (NN: Research, Estimates) share. Based on Alactel's closing price Tuesday, that value the Canadian company's stock at $38.97, some 13 percent above its Tuesday close.
    graphicNewbridge shares rose 1-5/8 to 34-3/8 Tuesday on expectations of an announcement before trading in the shares was suspended. The company delayed releasing its third-quarter earnings, which were due Tuesday.
    Alcatel shares fell 0.8 percent to 235 euros Wednesday in Paris.
    The deal is subject to the approval of shareholders of both companies and to a Canadian overseas investment review.
    While Newbridge has issued a string of profit warnings in recent months, analysts regard its experience in broadband wireless technology and its blue-chip customer base as making it a good fit with Alcatel (PCGE). The French company has a market value of almost 50 billion euros ($50.3 billion).
    Alcatel expects the deal to add substantially to earnings per share, excluding goodwill, as soon as 2001 and to have a slight impact on earnings per share in 2000.
    Alcatel said the forecasts do not include any potential revenue benefits, though the company noted they had been "a key driver" of the deal.
    The forecasts include $150 million of expected cost savings in 2001.
    Newbridge will be merged with Alcatel's Carrier Data Division to create a new unit, the Carrier Internetworking Division, based in Canada. Back to top

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