The French telecom giant, Alcatel, confirmed early Wednesday it's taking over Canada's Newbridge Networks in an all-stock agreement worth $7.1 billion US.

The deal values Newbridge shares at about $39 US, an 11 per cent premium over where they last traded.

Newbridge stock was halted late Tuesday, pending the takeover announcement. Its shares last traded in New York at $34.37 US. On the TSE, Newbridge was trading at $50.60 when trading was halted, up $3.85 on the day.

Newbridge is Canada's second largest independent telecommunications company.

It produces switches and wireless products for Internet providers in over 100 countries. It employs about 6,000 people.

Alcatel chairman Serge Tchuruk told analysts Wednesday morning the company would be looking for cost savings of $160 million, but denied speculation the deal would lead to long-term job losses.

He said Newbridge president Pearse Flynn would head a new Alcatel division to be based in Kanata, just outside Ottawa.

Alcatel's purchase ends the speculation over who would win Newbridge. Last November, when Newbridge reported disappointing earnings, it said it was looking for a buyer.

Wednesday morning, Newbridge reported record revenues when it released its Q3 results. Revenue was $521 million. But profit slipped to $33.9 million, down 27 per cent from a year earlier.

Analysts have long said Newbridge was too small to compete against its bigger rivals like Nortel Networks, Cisco, and Lucent, which all have market capitalizations 20 to 40 times greater than Newbridge's.

Newbridge was formed in 1986 by its current CEO Terence Mathews.