Lucent-Alcatel Merger Concerns Groups
By LINDA A. JOHNSON, AP Business Writer - March 31, 2006

Lucent Retirees Seek to Protect Pensions in Alcatel Merger Talks
By SARA SILVER, The Wall Street Journal - March 31, 2006

Lucent retirees want protection in Alcatel talks

NEW YORK, March 31 (Reuters) - Retirees of Lucent Technologies Inc. (LU.N: Quote, Profile, Research) said on Friday the U.S. government should not approve Lucent's proposed merger with France's Alcatel (CGEP.PA: Quote, Profile, Research) unless their pensions will be protected.

"No one should want a foreign company to own a $34 billion pension fund -- worth more than twice Lucent's market value -- unless safeguards are in place to protect the pension and benefits of 235,000 retirees and their dependents," Ken Raschke, president of the Lucent Retirees Organization, said in a statement.

"We are counting on our government to go over the merger with a fine-toothed comb," Raschke said.

Alcatel, the world's third biggest telecoms equipment supplier, is in talks to merge with its smaller U.S. rival to create a $36 billion company that would overtake Cisco Systems Inc. (CSCO.O: Quote, Profile, Research) as the industry leader in terms of sales.

According to Lucent's Web site, the company employed 30,200 people worldwide as of the end of 2005.

Alcatel said the merger would be carried out at market prices, implying it would have some 60 to 65 percent of a combined company that is expected to be based in Paris.

Merger talks headed into the weekend, overshadowed by a politically charged dispute over Alcatel's military assets, though sources close to the matter said there was little chance of stopping the transatlantic merger deal, which was already "95 percent" complete.

Lucent's Bell Labs also has sensitive defense contracts with the U.S. government that would likely need to be ring fenced from foreign investors, analysts said.

Raschke, whose organization represents 235,000 retirees and dependents, called on government leaders to hold Lucent and Alcatel accountable for the security of the pensions and benefits of Lucent's retirees, and said an independent entity should be appointed to oversee this issue.

Lucent spokeswoman Mary Ward declined comment except to say the company was in discussions for a merger with Alcatel but could not guarantee a deal would be reached.

Lucent's pension fund, which had total assets of $34 billion as of September 30, 2005, is an important source of income for the company as it receives a non-cash pension accounting credit that boosts net income.

For its fiscal 2006 first quarter, ended December 31, 2005, Lucent reported a net loss of $104 million and said the net pension and post-retirement benefit credit for the quarter was $104 million.

For fiscal 2005, Lucent reported net income of $1.19 billion and a pension credit of $718 million.