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Alcatel-Lucent Deal Faces Legal Test

September 01, 2006 — CIO —

Alcatel and Lucent Technologies’ plan to form a global communications equipment giant may run into a roadblock next week in a state court in New Jersey.

The companies face a showdown Sept. 6 with shareholders who want to postpone Lucent’s Sept. 7 shareholder meeting on the merger as they pursue lawsuits to block it. The Superior Court of New Jersey in Union County is set to hear arguments that day on whether to grant an injunction sought in a proposed class-action suit, Resnick v. Lucent Technologies. On Thursday, the plaintiffs in another suit, filed in New York, agreed to join in on that hearing.

Alcatel and Lucent announced in April that they agreed to merge into a single company, based in Paris, that would have about US$25 billion in annual revenue. Lucent has struggled in the wake of the post-2000 telecom crash, and the deal is also seen as an outgrowth of consolidation among the carriers that buy from big equipment companies such as Alcatel and Lucent.

But the merger, now heading for votes by shareholders in both companies, has been criticized and still faces some hurdles. The stocks of both companies have fallen since the deal was announced, and some investment firms have spoken out against the merger. The European Commission and the U.S. Federal Trade Commission have both approved the deal, but it still needs approval from the Committee on Foreign Investment in the United States. Both companies have scheduled shareholder meetings on Sept. 7 to vote on the deal.

In May, the Asa R. Maley Trust sued Lucent and several of its executives in U.S. District Court for the Southern District of New York, alleging they made a deal that would benefit executives and hurt shareholders. The plaintiffs sought class-action status.

"In essence, the proposed Acquisition is the product of a hopelessly flawed process that was designed to ensure the sale of Lucent to one buyer, on terms preferential to Alcatel and to subvert the interests of plaintiff and the other public stockholders of Lucent," the plaintiffs said in their complaint.

On Thursday, the attorneys in the Maley case agreed to serve as co-counsel for the plaintiffs in the similar Resnick case and will submit their papers for the Sept. 6 hearing in New Jersey. Lucent is based in Murray Hill, N.J.

In a U.S. Securities and Exchange Commission filing on Tuesday, Lucent said the Resnick suit was without merit and it has substantial defenses to the claims. In a response to the Maley case earlier this month, the company told the New York court that the Maley case should be dismissed.

 

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