Nokia- Alcatel Lucent deal: Transaction overview

Both companies have signed a MoU regarding the transaction
Rajeev Suri, president and chief executive officer of Nokia.
Rajeev Suri, president and chief executive officer of Nokia.

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Nokia and Alcatel-Lucent have announced their intention to merge. Check the transaction overview:

  • Based on Nokia estimates, the addressable market of the combined company in 2014 was approximately 50% larger than the current addressable networks market for Nokia alone, 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, according to Nokia.
  • The combined company would target approximately EUR 900 million of operating cost synergies to be achieved on a full year basis in 2019, assuming closing of the transaction in the first half of 2016.
  • The combined company would target approximately EUR 200 million of reductions in interest expenses to be achieved on a full year basis in 2017.
  • The transaction is expected to be accretive to Nokia earnings on a non-IFRS basis (excluding restructuring charges and amortization of intangibles) in 2017. These targets both assume closing of the transaction in the first half of 2016.
  • The combined company is expected to have a strong balance sheet, with combined net cash at December 31, 2014 of EUR 7.4 billion, assuming conversion of all Nokia and Alcatel-Lucent convertible bonds.
  • Nokia maintains its long term target to return to an investment grade credit rating and intends to manage the combined capital structure accordingly by retaining significant gross and net cash positions and by proactively reducing indebtedness. This includes Nokia's intention to exercise an early repayment option for its EUR 750 million convertible bond in the fourth quarter of 2015, which is expected to result in the full conversion of this convertible bond to equity prior to the closing of the transaction, with no expected cash outflow.
  • Nokia will suspend its capital structure optimization program, including suspending the share repurchase program execution, effective immediately until the closing of the transaction. Following the closing of the transaction, Nokia intends to evaluate the resumption of a capital structure optimization program for the combined company.
  • The proposed transaction does not impact Nokia's ability and intent to continue annual dividend payments. Nokia's Board of Directors dividend proposal of EUR 0.14 for the year ended December 31, 2014 is maintained.

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