The US government has given the green light for the multi-billion-dollar merger of Alcatel and Lucent.

President Bush accepted a recommendation that he not suspend or prohibit the planned merger on security grounds after an agency that oversees foreign investment said the deal should be allowed.

The companies announced in April they would merge, creating a giant communications equipment vendor based in Paris. The deal faced scrutiny on both sides of the Atlantic, partly because both companies have sensitive government contracts related to national security. Approval by the US Committee on Foreign Investment in the US (CFIUS), an inter-agency panel led by the Secretary of the Treasury, was to be the last hurdle to the deal, according to the companies. Members of Congress held a hearing on the deal earlier this week.

It follows approval by the EU in July, and stakeholder agreement in August.

Lucent has agreed to form a subsidiary run by US citizens to perform sensitive research and development work for the government. In addition, Alcatel has agreed to sell its satellite business to allay national security concerns in France.

Earlier this year, the proposed acquisition of operations at several US ports by London-based Dubai Ports World created a political firestorm fueled by security concerns.

Original reporting by IDG News Service