Nokia released a statement confirming its merging with French telecommunications infrastructure equipment specialist Alcatel-Lucent.
The combined company will create a networking giant to rival market leaders Ericsson and Huawei backed by joint revenue of roughly €26bn in 2014. Rumours about a merger between the two companies have been circulating for years, but Nokia’s hand appears to have been forced by a report in French newspaper Les Echos suggesting any deal would include only Alcatel-Lucent’s mobile network arm which was subsequently picked up by other publications.
A statement released by Nokia announced their 'intention to combine to create an innovation leader in next generation technology and services for an IP connected world.'
Each company’s Board of Directors has approved the terms of the proposed transaction, which is expected to close in the first half of 2016. The proposed transaction is subject to approval by Nokia’s shareholders, completion of relevant works council consultations, receipt of regulatory approvals andother customary conditions.
It went on to state the deal would be 'on the basis of 0.55 of a new Nokia share for every Alcatel-Lucent share. The allshare transaction values Alcatel-Lucent at EUR 15.6 billion on a fully diluted basis, corresponding to afully diluted premium of 34%.' This puts the valuation of Alcatel-Lucent around 2 billion Euros higher than previously expected.
Nokia’s telecommunications infrastructure unit Nokia Solutions Networks (NSN - formerly Nokia Siemens Networks) is the cash cow of the company, with revenue flat at €11.2bn in 2014, down 1% on the previous year though first quarter sales were up 8% year on year to €3.36bn. Nokia is also rumoured to be in talks to sell it’s HERE mapping unit, valued at around €2bn, presumably to help finance the Alcatel-Lucent deal.
The major reason for the merger was described as such, 'With more than 40 000 R&D employees and spend of EUR 4.7 billion in R&D in 2014, the combined
company will be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging.