Nokia Agrees to $16.6 Billion Takeover of Alcatel-Lucent
The Finnish telecommunications company Nokia said Wednesday that it had agreed to an all-share takeover of Alcatel-Lucent that valued its French rival at 15.6 billion euros, or about $16.6 billion.
The combined company is expected to become the world’s second-largest telecom equipment manufacturer behind Ericsson of Sweden, with global revenues totaling $27 billion and operations spread across North America, Europe and Asia.
The companies are betting that, by joining forces, they can better compete against Chinese and European rivals bidding to provide telecom hardware and software to the world’s largest carriers, including AT&T and Verizon in the United States, Vodafone and Orange in Europe, and SoftBank in Japan.
The announcement came after the companies had said they were in advanced talks over a deal, which would represent the latest in a string of mergers in the fast-consolidating telecom sector.
Nokia said that it had offered 0.55 of a new share for each Alcatel-Lucent share, roughly a one-third premium to the company’s stock price before the news of a potential deal was first announced.
Nokia’s chief executive, Rajeev Suri, would take over the combined company, which expects the restructuring to save about $1 billion a year starting in 2019.
“Together, Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services,” Mr. Suri said. “We will have a strong presence in every part of the world, including leading positions in the United States and China.”
The deal is expected to be completed in the first half of next year, with Nokia shareholders owning 66.5 percent of the telecom giant and Alcatel-Lucent investors holding the rest.
Despite the global popularity of smartphones and widespread Internet access, companies like Nokia and Alcatel-Lucent, which provide much of the equipment underpinning high-speed networks, have struggled to remain profitable.
Faced with a gradual slowdown in how much global carriers are spending to upgrade their cellphone and broadband networks, telecom manufacturers have been forced to consolidate, slash jobs and restructure their operations to bolster profitability.
The announcement on Wednesday was the latest twist in Nokia’s history, whose corporate heritage dates back to the 19th century. The company had been the world’s largest smartphone maker, but eventually sold its handset division to Microsoft last year after failing to compete with the likes of Apple and Samsung.
After joining Nokia in the mid-1990s, Mr. Suri, an Indian citizen, has successfully overhauled the company’s telecom equipment unit by cutting costs and laying off thousands of employees.
Analysts say Nokia has progressively focused on its equipment unit, which now represents roughly 85 percent of the company’s annual revenue. On Wednesday, Nokia confirmed that it had put its digital maps business — a competitor for Google Maps — up for sale. The division provides less than 5 percent of the company’s yearly sales.
For Alcatel-Lucent, itself a product of a struggling merger in 2006 between Alcatel of France and Lucent Technologies of the United States, Nokia’s offer follows an attempt at restructuring its own operations, announced in 2013, which involved 10,000 job cuts.
This week, French unions expressed concerns that Nokia’s takeover would lead to significant layoffs in the country.
To assuage concerns, both Mr. Suri and Michel Combes, the current Alcatel-Lucent chief executive, met with President François Hollande of France at the Élysée Palace. France’s economic ministry also has indicated that it might support the merger.
Yet analysts raised doubts whether Nokia would be able to significantly reduce its operations in France, as the country’s policymakers have routinely intervened in takeovers when French jobs and assets have been threatened.
“The French government won’t want Nokia to cut jobs in France,” said Neil Campling, an analyst at Aviate Global in London. “For this to work, there has to be significant job cuts. I’m skeptical about how this will play out.”
Source: New York Times/ Moneybeat – Nokia Agrees to $16.6 Billion Takeover of Alcatel-Lucent
