Nokia plans to acquire rival telecoms vendor Alcatel-Lucent in a deal worth $16.6 billion.
The proposed transaction, which would help Nokia compete with industry heavyweights Ericsson and Huawei, is expected to close in the first half of 2016 and has been approved by both boards of directors.
The new company will be called Nokia Corporation, with headquarters in Finland and a strong presence in France. Risto Siilasmaa is planned to serve as chairman, and Rajeev Suri as chief executive officer.
The deal is subject to approval by Nokia's shareholders, completion of relevant works council consultations, receipt of regulatory approvals and other customary conditions. The combined company's board of directors is planned to have nine or ten members, including three members from Alcatel-Lucent, one of whom would serve as Vice Chairman.
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 offer values Alcatel-Lucent at EUR 15.6 billion on a fully diluted basis, after taking into account the early conversion and associated dilution of Alcatel-Lucent's convertible bonds, corresponding to a fully diluted premium of 34% (equivalent to EUR 4.48 per share), and a premium to the shareholders of 28% (equivalent to EUR 4.27 per share), on the unaffected weighted average share price of Alcatel-Lucent for the previous three months. This is based on Nokia's unaffected closing share price of EUR 7.77 on April 13, 2015, the company reports.
Alcatel-Lucent shareholders would own 33.5% of the fully diluted share capital of the combined company, and Nokia shareholders would own 66.5%, assuming full acceptance of the public exchange offer.
Nokia Corporation will retain Alcatel-Lucent's Bell Labs research and development brand and Nokia's FutureWorks, as well as Nokia Technologies, which will stay as a separate entity with a clear focus on licensing and the incubation of new technologies.
Rajeev Suri, President and chief executive officer of Nokia, said: "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.”
Michel Combes, chief executive officer of Alcatel-Lucent, 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. 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.”
Matthew Reed,practice leader Middle East and Africa at Ovum, said to CommsMEA: “Currently, there are two big telecoms equipment vendors – Huawei and Ericsson – while Nokia and Alcatel-Lucent are mid-ranked players. If the combination of Nokia and Alcatel-Lucent goes ahead it will create a third big vendor, alongside Huawei and Ericsson.”
“There is a logic to the combination as Nokia and Alcatel-Lucent could bring together their respective strengths: Nokia is a mobile-only equipment vendor, while Alcatel-Lucent’s strengths are in the fixed-network business. Managing the process of restructuring, while remaining focused on customers and the market, is likely to be a challenge if Nokia and Alcatel-Lucent combine,” Reed added.
According to Reed, Nokia and Alcatel-Lucent also face the challenge that the network market is moving from hardware to software, and towards a convergence of IT and telecoms technology.