Lucent postponed Agere Systems’ planned separation because its bank creditors made the spin-off conditional on Lucent improving its finances. The lenders required positive EBITDA and a larger cash balance; Lucent had still owned 58% of Agere when it announced the delay in August 2001. The separation became effective June 1, 2002.
Why did Lucent delay the Agere spin-off?
On August 17, 2001, Lucent said the planned September 30 spin-off would be delayed after its bank creditors approved another round of restructuring. The revised agreement gave Lucent up to six months to meet the conditions before it could complete the separation. EDN’s August 2001 account reported the announcement.
The delay was therefore a financing condition, not an announced change in the intention to separate Agere. Lucent still owned 58% of Agere at the time, and it could not complete the spin-off until it met the revised covenants.
What did creditors require?
The agreement set two financial tests for Lucent:
- Reach positive EBITDA: Lucent had to report positive earnings before interest, taxes, depreciation and amortization.
- Increase cash: Lucent’s cash target rose from $2.5 billion to $3 billion. The August 2001 report said Lucent believed it was on track to meet this cash condition.
Lucent’s chief financial officer, Frank D’Amelio, described the revised requirements as achievable “given reasonable market conditions.” He said the company’s Phase II restructuring was intended to make Lucent leaner and help it return to profitability and positive cash flow during fiscal 2002, which began October 1, 2001. Those were management’s stated goals, distinct from the creditors’ specific EBITDA and cash conditions. EDN
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What else was included in Lucent’s restructuring?
The restructuring included previously announced plans for layoffs of up to 20,000 workers, according to the August 2001 report. That was a period figure, not a current headcount or a statement that every planned job reduction had occurred. EDN also put Agere’s market capitalization at approximately $12.4 billion at the time; that historical valuation should not be read as a current value. EDN’s report
When was Agere finally separated?
Lucent completed the spin-off effective June 1, 2002, according to its SEC Form 8-K. The filing says Lucent distributed Agere shares to Lucent shareholders of record at 5:00 p.m. EDT on May 3, 2002. Lucent’s Form 8-K
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How did Lucent shareholders receive Agere shares?
The distribution consisted of two Agere share classes, with separate exchange ratios:
| Agere shares distributed | Exchange ratio for Lucent shareholders |
|---|---|
| 37.0 million Class A shares | 1 Agere Class A share for every 92.768991 Lucent shares |
| 908.1 million Class B shares | 1 Agere Class B share for every 3.779818 Lucent shares |
The SEC filing states that fractional interests were combined and sold by Lucent’s transfer agent rather than distributed as fractional Agere shares. These figures and mechanics are from the 2002 filing. SEC Form 8-K
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