Lucent to sell, lease plants to Celestica

By : |July 25, 2001 0



MURRAY HILL: Beleaguered telecommunications equipment giant Lucent
Technologies Inc. said on Tuesday that it was planning to sell or lease two
plants to electronics contract manufacturer Celestica Inc. for between $550
million to $650 million in cash.

Lucent also said as part of the deal, it will enter into a five-year supply
agreement valued at up to $10 billion for Toronto-based Celestica to be the
primary maker of Lucent’s switching, access and wireless networking products.

                                 

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Lucent said it would sell its plants in Columbus, Ohio, and lease another
facility in Oklahoma City to Celestica. It will sell equipment and inventory at
both plants. The final purchase price will be determined by the assets, mostly
inventory, transferred at the time of the close.

The transaction, expected to occur over the next few months, is expected to
close no later than the end of this quarter and is subject to regulatory
approvals. The 6,000 employees at the two plants will remain with Lucent during
a transition period. Going forward Lucent will operate a systems integration
center in Columbus and an administrative support operation in Oklahoma City.

"By expanding our use of contract manufacturers, Lucent will benefit
from their expertise and investments while we focus our resources on developing
the advanced intelligent networking systems large service providers will need in
the future," Rock Pennella, Lucent vice president of project management,
said in a statement.

The deal
Meanwhile, in Toronto, Celestica Inc. said it had agreed to purchase
inventory, real estate and operating assets from Lucent for about $550 million
to $650 million, as part of the deal.

The deal, which is expected to close before the end of the current quarter,
will result in about $10 billion worth of work moving over to Celestica, some of
which will be transferred to Celestica’s facilities around the world. Lucent
said the outsourcing agreement would allow it to optimize cash flow from
operations while freeing up capital.

S&P may cut rating
In New York, rating agency Standard & Poor warned that Lucent
Technologies Inc.’s credit rating may be cut to junk status, following its plans
to take a $7 billion to $9 billion restructuring charge and cut up to 20,000
more jobs.

S&P said it may cut Murray Hill, New Jersey-based Lucent’s
"BB-plus" corporate credit rating, its highest junk grade, and other
ratings, and warned: "Based on a preliminary assessment, a rating action
may not be limited to one notch." Lower credit ratings usually raise
corporate borrowing costs.

Some of its other plans include, axing its dividend, delaying spin-off of
Agere Systems by six months, selling its fiber-optic unit to Japan’s Furukawa
Electric Co. and Corning Inc. for a combined $2.75 billion. Its debt already
carries junk grades from all leading credit rating agencies.

S&P said fiber sale proceeds "will be materially less" than
expected, and that a tough business environment has crimped Lucent’s ability to
improve revenues. It said the restructuring charge "indicates the extent of
the pressures that Lucent faces in an increasingly strained communications
equipment market."

(C) Reuters Limited 2001.

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