Nokia agreed to acquire Alcatel-Lucent in a deal valued at EUR 15.6 billion — a premium to shareholders of 28% (equivalent to EUR 4.27 per share) over the unaffected weighted average share price of Alcatel-Lucent for the previous three months. Under the transaction Nokia will make an offer for all of the equity securities issued by Alcatel-Lucent, through a public exchange offer in France and in the United States, on the basis of 0.55 of a new Nokia share for every Alcatel-Lucent share. The boards of directors of both companies have agreed to the deal.
Nokia said it was motivated to do the deal because the addressable market of the combined company in 2014 was approximately 50% larger than its current addressable networks market, increasing from approximately EUR 84 billion to approximately EUR 130 billion. The combined company is expected to have a stronger growth profile than Nokia’s current addressable market, with an estimated CAGR of approximately 3.5% for 2014-2019.
Some highlights:
- The combined company will be called Nokia Corporation, with headquarters in Espoo, Finland and a strong presence in France. It will also have major R&D centers in Germany, the U.S. and China. It will retain its Bell Labs brand in the U.S..
- For France, Nokia said intends to maintain employment levels consistent with Alcatel-Lucent’s end-2015 Shift Plan commitments, with a particular focus on the key sites of Villarceaux (Essonne) and Lannion (Côtes d’Armor). Plans also include a 5G R&D centre of excellence in France.
- Risto Siilasmaa is planned to serve as Chairman, and Rajeev Suri as Chief Executive Officer.
- The combined company would target approximately EUR 900 million of operating cost synergies to be achieved on a full year basis in 2019. The cost savings will come from organizational downsizing, elimination of overlapping products and services, centralized functions and regional sales organizations. The combined company could reduce overhead costs in real estate, manufacturing, supply chains, IT and overall G&A expenses, including public company costs.
- The combined company would target approximately EUR 200 million of reductions in interest expenses to be achieved on a full year basis in 2017.
- For FY 2014, the combined company would have had net sales of EUR 25.9 billion, a non-IFRS operating profit of EUR 2.3 billion, a reported operating profit of EUR 0.3 billion, R&D investments of approximately EUR 4.7 billion, and a strong balance sheet with combined net cash at December 31, 2014 of EUR 7.4 billion.
- For comparison in FY 2014, Ericsson had carrier revenues of approximately EUR 25.1 billion, Huawei had EUR 23.5 billion and Cisco had EUR 9.0 billion.
- In China, Nokia would own Alcatel-Lucent’s 50% plus one share holding in Alcatel-Lucent Shanghai Bell, a company limited by shares supervised by the State-owned Assets Supervision and Administration Commission of China.
Rajeev Suri, President and Chief Executive Officer of Nokia, stated: “Together, Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services, with the scope to create seamless connectivity for people and things wherever they are. Our innovation capability will be extraordinary, bringing together the R&D engine of Nokia with that of Alcatel-Lucent and its iconic Bell Labs. We will continue to combine this strength with the highly efficient, lean operations needed to compete on a global scale. We have hugely complementary technologies and the comprehensive portfolio necessary to enable the internet of things and transition to the cloud. We will have a strong presence in every part of the world, including leading positions in the United States and China.”
Michel Combes, Chief Executive Officer of Alcatel-Lucent, stated: “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. I am proud that the joined forces of Nokia and Alcatel-Lucent are ready to accelerate our strategic vision, giving us the financial strength and critical scale needed to achieve our transformation and invest in and develop the next generation of network technology.”