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Alcatel to acquire Newbridge for $US7.1B

Alcatel to acquire Newbridge for $US7.1B

Alcatel SA, seeking to become a larger player in the carrier-class telecommunications equipment market, today announced it has agreed to acquire Newbridge Networks in a deal valued at $US7.1 billion.

The agreement, which has been approved by the boards of both companies, calls for Newbridge shareholders to receive 0.81 of Alcatel's American Depository Shares (ADS) for each of their share in Newbridge, the companies said in a joint statement. An ADS is a certificate issued in the US representing a portion of a share in a non-US company.

The value of the deal cited by the companies is based on Alcatel's closing share price yesterday, a premium of 19 per cent over the $39 per share closing price of Newbridge stock the same day.

The acquisition will immediately make Alcatel a leading player in the ATM (asynchronous transfer mode) equipment market. Newbridge Networks holds approximately 25 per cent of that market, as do competitors Lucent Technologies and Cisco Systems, according to information on Alcatel's website.

After the merger, Alcatel plans to create a new Carrier Internetworking Division (CID), based at Newbridge's existing headquarters in Kanata, Canada. The division will consist of Newbridge Networks and Alcatel's existing Carrier Data Division, which includes the company's ADSL (asynchronous digital subscriber line), IP (Internet Protocol) and Internet-related equipment divisions.

Alcatel said the Newbridge acquisition represented a faster way to get into the market for high bandwidth data networking equipment geared to telecommunications carriers than developing its own products.

"It helps us become very quickly a much more data-oriented company," said Alcatel spokesman Klaus Wustrack. "You have a choice. You either develop it inside or, if you have a chance, you accelerate your move into it with an acquisition, and that's what we did."

Alcatel's largest ATM switch at present can handle maximum data throughput of 22Gbps, whereas Newbridge's new 670 platform scales from 50Gbps to 450Gbps, Alcatel said.

Pending shareholder approval, Alcatel hopes to complete the deal by the end of the second quarter of this year.

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