Lucent Technologies and Ascend Communications have signed a definitive agreement to merge, the companies announced on Wednesday.
Under the terms of the agreement, which has been approved by both companies' boards of directors, each share of Ascend will be converted into 0.82 shares of Lucent, according to a joint statement issued today. Based on Lucent's closing share price yesterday of $US107, the transaction is worth about $US20 billion, the companies said.
The transaction will most likely be completed during Lucent's third quarter, ending June 30, 1999, said the statement. It will be accounted for as a pooling of interests and Lucent said it expects the merger to be neutral to earnings in fiscal 1999 and accretive starting in fiscal year 2000.
The merger is designed to broaden Lucent's ability to sell next-generation networks to telecommunications carriers. Lucent chief executive officer Rich McGinn noted in the statement that almost every major telecoms carrier is deciding how to re-engineer and deploy their networks for data, voice, fax and video. Ascend provides WAN (wide area network) core switching and access data networking equipment for telcos, Internet service providers (ISPs) and enterprises.
The merger is the latest step by Lucent to boost its presence in the data networking business. In the past two years, it has acquired 11 companies in strategic data networking technologies, developed intelligent switching, access and network management products internally and signed a number of strategic partnership deals for sales and distribution, the company said.
Ascend's organisation and Lucent's Data Networking Systems, Optical Networking and Communications Software groups will be put together to form the Broadband Networks Group, which will be led by Dan Stanzione, Lucent's chief operating officer and group president. The unit will focus on selling broadband, multiservice networks, according to the statement.
Mory Ejabat, chief executive officer of Ascend will stay on during a transition period in an unspecified role, the statement said.