Nokia has agreed to buy rival European vendor Alcatel-Lucent in an all-stock deal valuing the latter at €15.6bn (US$16.6bn). Nokia shareholders will own 66.5% of the new combined company, while Alcatel shareholders will own 33.5%, according to…
Nokia has agreed to buy rival European vendor Alcatel-Lucent in an all-stock deal valuing the latter at €15.6bn (US$16.6bn).
Nokia shareholders will own 66.5% of the new combined company, while Alcatel shareholders will own 33.5%, according to statements from both parties.
The pair has entered into a memorandum of understanding which will see the Finnish company make a public exchange offer in France and the US for all shares in Paris-based Alcatel, Nokia said. The Helsinki-based company said it intends to offer 0.55 new Nokia shares for every Alcatel share, equal to €4.27 a share, representing a 28% premium on the French company’s average share price over the past three months.
The combined company will be based just outside Helsinki and operate under the Nokia brand, while operating “strategic business locations” and other major R&D centres in France and other countries including Germany, the US and China. The Bell Labs brand will be retained for “networks-focussed innovation activities”.
Both companies’ boards have approved the deal, which is expected to close in the first half of 2016. However, it is still subject to the approval of Nokia shareholders and regulators and the completion of relevant works council consultations.
JP Morgan acted as financial adviser to Nokia and produced a fairness opinion to its board in connection with the transaction. Skadden, Arps, Slate, Meagher & Flom and Roschier attorneys were legal advisers.
Meanwhile, Zaoui & Co served as lead M&A adviser to Alcatel and delivered a fairness opinion to its board. Sullivan & Cromwell was the company’s legal adviser.
Nokia president and CEO Rajeev Suri said the merging companies “expect to have the scale to lead in every area in which we choose to compete, drive profitable growth, meet the needs of global customers, develop new technologies, build on our successful intellectual property licensing and create value for our shareholders”.
Alcatel CEO Michel Combes added: “A combination of Nokia and Alcatel-Lucent will offer a unique opportunity to create a European champion and global leader in ultra-broadband, IP networking and cloud applications”.
He said the combined companies will have the financial firepower and critical scale needed to “achieve our transformation and invest in and develop the next generation of network technology”.
Assuming the deal closes in 2016, the combined company would target about €900m of operating cost synergies in 2019 and €200m in reduced interest expenses by 2017, Nokia said.
Together, the companies had €7.4bn in net cash at the end of December 2014, assuming conversion of all convertible bonds, the Finnish company noted.
Upon closing, Nokia plans to set up a €100m investment fund for start-ups in France, with a focus on the Internet of Things and the Industrial Internet.
Suri will serve as CEO of the combined company, while Nokia chairman Risto Siilasmaa will be chair. Nokia said a vice chairman from Alcatel will be nominated.
Future disposals
The deal could lead to disposals of certain parts of the businesses.
Nokia said it has launched a review of strategic options for its mapping business HERE, which “may or may not lead to a transaction”.
Combes was cited saying at a press conference in Paris that Alcatel’s submarine cable business is likely to be divested, potentially in a public offering.
