Telecommunications equipment maker Lucent Technologies has settled some 54 shareholder lawsuits for US$568 million in stock, cash and stock warrants to end securities laws violation claims dating to January 2000.
In an announcement last week, the Murray Hill, N.J.-based company said it didn't admit any wrongdoing as part of the settlement, which is subject to final court approval.
The cases involved 54 separate lawsuits, including a consolidated shareholder securities class-action lawsuit in the U.S. District Court in Newark, N.J., which alleged that the company violated federal securities laws and related state laws. The claims are in connection with the company's 1999 and 2000 financial reporting periods, when Lucent suffered a major decline in its stock price.
"This settlement puts all pending shareowner and related litigation behind us," CEO and Chairman Patricia Russo said in a statement. "By resolving these legacy issues, we can put all of our energy into running the business and continuing to re-build shareowner confidence in the performance of this company."
Under the agreement, Lucent will pay $315 million in common stock and/or cash and will issue about $100 million worth of stock warrants that will allow holders to purchase an equal number of shares of common stock at a strike price of $2.75. Lucent will also pay about $5 million for the cost of settlement administration, while its insurance companies will pay about $148 million into the settlement fund.
Lucent will take a charge in the second quarter of fiscal 2003 of approximately $420 million, or 11 cents per share, to pay for the settlement.
Bill Price, a company spokesman, said about $70 million of the settlement could eventually be returned to the company from fiduciary insurance companies. That would reverse part of the charges being taken by the company.
He said the settlement is expected to take about 18 months to complete. "This is a very complex and large-scale settlement, so these things do take time."
The settlement will help the company close an uncomfortable chapter in its history and at least give it a chance at recovery, said Jeff Kagan, an independent telecom analyst in Atlanta. "Lucent dodged this big bullet," Kagan said."This was a potential nightmare for Lucent, and if they had lost, not only would it have been a huge distraction, but it would have been financially fatal."
Lucent, which has been hit with a string of layoffs, is "not the same company that we knew two or three years ago," Kagan said. "It's a shadow of its former self."
But though the settlement is costly, it does mean shareholders will get certain money and the company "at least can now plan and project and work this into their strategy," he said. "It's no longer the big unknown."