Merger Between Alcatel, Lucent Expected Soon

French telecommunications equipment maker Alcatel continued negotiations over the weekend to buy floundering U.S. rival Lucent Technologies Inc. for about $32 billion and an agreement could be announced Wednesday, sources familiar with the situation said Monday.

The two equipment manufacturers, who declined to comment, held negotiations throughout the long holiday weekend and worked to settle final details, sources said. The companies’ boards are expected to vote on the deal today, one source said.

Lucent shareholders would not receive a premium over the value of Lucent’s stock price. Lucent, however, would distribute its 20% stake in Agere Systems Inc. to only Lucent shareholders, the second source said.

The Agere distribution, which had been planned as part of Lucent’s recent spinoff of the optical components and semiconductor business, would provide a small benefit for Lucent stockholders in lieu of a premium paid by Alcatel, that source said.

Assuming final negotiations proceed successfully, the deal probably would be announced Wednesday--midday in Paris and before markets open in the United States.

The structure and timing of a deal still may change, sources cautioned.

In New York Stock Exchange trading Friday, Lucent stock closed at $9.40, down 13 cents, and Alcatel’s U.S.-listed shares ended at $28.11, down $1.35.

Alcatel Chief Executive Serge Tchuruk would lead the combined company, while Lucent Chairman Henry Schacht would assume a lower but still senior position, a source said.

The deal will be characterized as a so-called merger of equals, but sources said Alcatel clearly will be buying Lucent, which posted $4.7 billion in losses in the first half of its current fiscal year.

Lucent, which carries a massive debt load, has fallen behind rivals such as Nortel Networks Corp. and Cisco Systems Inc. due to management turnover and product-development missteps.

“It gives Lucent a clean slate to start over, and it gives Alcatel a big foot in the door in the U.S. marketplace,” said independent telecommunications analyst Jeffrey Kagan.

The combined company is expected to be legally incorporated in Paris, but headquartered in Lucent’s home of Murray Hill, N.J., sources said.