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Alcatel Is Said to Discuss Enterprise Unit Sale With Unify (3)

January 13, 2014

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Alcatel-Lucent shares rose as much as 3.7 percent to 3.23 euros and added 3.6 percent to 3.22 euros at 9:14 a.m. in Paris. Photographer: Balint Porneczi/Bloomberg

Alcatel-Lucent SA (ALU) is in talks to sell its enterprise business to potential buyers including Unify GmbH & Co. KG, a Gores Group LLC and Siemens AG (SIE) venture, according to three people familiar with the matter.

The enterprise unit, which sells telecommunications equipment and services to companies and had 2012 revenue of 764 million euros ($1 billion), has also attracted interest from an industrial company from outside the U.S. and a Chinese investor, one of the people said. Lazard Ltd. is advising Paris-based Alcatel-Lucent on the process.

A sale would allow Alcatel-Lucent to focus on more profitable mobile-phone network contracts and bring the company closer to Chief Executive Officer Michel Combes’s goal of generating 1 billion euros from asset disposals by 2015. Combes is also cutting jobs to reduce expenses as competition with Chinese suppliers of networking equipment intensifies.

“The sale of its enterprise business would, we believe, help Alcatel incrementally strengthen its balance sheet,” Franklin Jarman and Karl Blunden, credit analysts at Goldman Sachs Group Inc., said in a note. “We see the potential for more transformational transactions in future quarters.”

Simon Poulter, a spokesman for Alcatel-Lucent, declined to comment, as did Unify spokeswoman Amy Martin. Representatives for Siemens and Gores Group also declined to comment.

Second-Round Bids

The potential buyers are preparing second-round bids, with a decision possible between this month and March, the people said. The unit may be valued at as much as 250 million euros, one of the people said. The business reported an operating loss of 12 million euros for 2012.

Alcatel-Lucent shares rose 5.1 percent to close at 3.27 euros, the biggest gain on Paris’s benchmark CAC 40 index, valuing the company at 9.1 billion euros.

Last month, Alcatel-Lucent agreed to sell its LGS Innovations unit, which provides networking and satellite-communication services to the U.S. government, for as much as $200 million. Part of the enterprise business was already sold in 2011, when Permira Advisers LLP agreed to buy the Genesys call-center software unit for $1.5 billion.

U.S. private-equity firm Gores Group owns 51 percent of Unify, with Siemens holding the remaining 49 percent. The venture, known as Siemens Enterprise Communications until October, was created in 2008 as part of the German engineering company’s retreat from telecommunications businesses.

Cisco Competition

Unify is preparing to introduce new communication software as it seeks to make itself more attractive to new investors. A purchase of the Alcatel-Lucent unit would give Unify access to a broader customer base, improving the Munich-based company’s ability to compete with Cisco Systems Inc. (CSCO:US), particularly in North America, one of the people said.

Since Combes became CEO of Alcatel-Lucent in April, the former Vodafone Group Plc executive has moved to renegotiate some of the company’s debt and announced a capital increase. He’s also in the process of negotiating the details of planned firings with unions. Alcatel-Lucent shares have more than tripled since Combes took over.

After meeting with Combes, French Industry Minister Arnaud Montebourg on Jan. 10 said Alcatel-Lucent must make an extra effort to keep as many jobs as possible in France.

The enterprise unit employs 2,800 people, including 1,400 in France, according to unions. Alcatel-Lucent a year ago had some 72,000 employees, and in October said it would eliminate 10,000 jobs, or 14 percent of its workforce, by 2015.

To contact the reporters on this story: Marie Mawad in Paris at mmawad1@bloomberg.net; Alex Webb in Munich at awebb25@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Simon Thiel at sthiel1@bloomberg.net


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