Nokia agrees 15.6-bil.-euro deal to buy Al­ca­tel-Lu­cent


Nokia has struck a 15.6-bil­lioneuro deal to buy its ri­val Al­catelLu­cent to cre­ate the world’s big­gest sup­plier of cell­phone net­work equip­ment, both firms said Wed­nes­day.

The merger of two com­pa­nies that were once new tech­nol­ogy stars but have since lost some of their lus­ter will pro­duce a Euro­pean cham­pion able to take on Nokia’s Swedish ri­val Eric­s­son or fierce Chi­nese com­pe­ti­tion.

The an­nounce­ment sent shares in Al­ca­tel-Lu­cent plung­ing more than 10 per­cent on Paris’s stock mar­ket, while Nokia’s stocks rose 1.8 per­cent to 7.62 eu­ros on the Helsinki mar­ket.

Fin­land’s Nokia said it had agreed to give share­hold­ers in its Franco-Amer­i­can ri­val 0.55 shares in the new merged com­pany for ev­ery one of their own.

“This trans­ac­tion comes at the right time to strengthen the Euro­pean tech­nol­ogy in­dus­try,” said Al­ca­tel-Lu­cent boss Michel Combes.

“The global scale and foot­print of the new com­pany will re­in­force its pres­ence in the United States and China,” he added.

The two firms have “highly com­ple­men­tary port­fo­lios and ge­ogra­phies, with par­tic­u­lar strength in the United States, China, Europe and Asia-Pa­cific,” Nokia’s state­ment said.

The new firm will go by the name Nokia, be based in Fin­land, and be run by Nokia’s cur­rent man­age­ment team, it said.

The group is tar­get­ing sav­ings of 900 mil­lion eu­ros ( US$ 960 mil­lion) in costs by the end of 2019 with­out fur­ther job cuts on top of the re­struc­tur­ing al­ready tak­ing place in Al­ca­tel- Lu­cent, both com­pa­nies said.

This is likely to ap­pease the French gov­ern­ment, which had ex­pressed con­cern about jobs dis­ap­pear­ing in the coun­try if the merger were to go through.

It has also in the past blocked takeovers of com­pa­nies it con­sid­ers na­tional jew­els.

The gov­ern­ment caused a furor in 2013 when it blocked a bid by U.S. gi­ant Ya­hoo! to ac­quire Dai­lymo­tion, and then again this month when it thwarted at­tempts by a Hong Kong tele­coms gi­ants to ac­quire the video-shar­ing site.

Not ‘los­ing Al­ca­tel’

Jean-Marie Le Guen, a mem­ber of the So­cial­ist Party gov­ern­ment, told French ra­dio that France was not “los­ing Al­ca­tel” and told em­ploy­ees that the gov­ern­ment would make sure they kept their jobs.

But “they must also know that if this merger didn’t hap­pen, then maybe one day, Al­ca­tel would not have been big enough to take on the in­ter­na­tional (mar­ket),” he said.

“If you watch the trains go by, you stay on the plat­form.”

Both com­pa­nies said that the merger should save an ad­di­tional 200 mil­lion eu­ros in fi­nan­cial charges.

Combes told French TV chan­nel BFM Busi­ness that the new group was com­mit­ted to “in­creas­ing R&D ac­tiv­i­ties in France by 25 per­cent” by hir­ing 500 ad­di­tional re­searchers, bring­ing the to­tal re­search and devel­op­ment work­force in the coun­try to 2,500.

“The new group’s in­no­va­tion and re­search ca­pa­bil­i­ties on a global scale will be spear­headed in France,” he said.

Ru­mors have swirled since De­cem­ber of a pos­si­ble deal be­tween the two firms, with France’s Les Echos daily re­port­ing on Mon­day that ex­ec­u­tives had been in ne­go­ti­a­tions since Jan­uary.

Nokia was the world’s big­gest mo­bile phone maker for more than a decade un­til it was over­taken by South Korea’s Sam­sung in 2012.

Then in 2014, Nokia sold its cell­phone and tablet di­vi­sion to U.S. soft­ware gi­ant Mi­crosoft, and the com­pany now de­vel­ops mo­bile and In­ter­net net­work in­fra­struc­tures for op­er­a­tors.

Nokia is now set for a sig­nif­i­cant boost in mar­ket share.

The deal will also help Nokia bol­ster its mo­bile in­fra­struc­ture busi­ness against Swedish archri­val Eric­s­son and China’s Huawei, prof­it­ing from Al­ca­tel’s po­si­tion as a lead­ing sup­plier of 4G and LTE mo­bile net­works and re­lated ser­vices.

Deutsche Bank an­a­lyst Jo­hannes Schaller said: “We see sev­eral risks for Nokia from this deal, if con­cluded, and be­lieve in­te­gra­tion could be chal­leng­ing both from a prod­uct and cul­ture per­spec­tive.”

“We be­lieve Eric­s­son could be the in­di­rect ben­e­fi­ciary of this pos­si­ble con­sol­i­da­tion,” added Schaller.


In this pic­ture, Nokia’s head of­fice is seen in Espoo, Fin­land on Wed­nes­day, April 15.

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