IMPROVING ITS WAR CHEST Nokia is in advanced talks to buy out France’s Alcatel-Lucent
French state backing is still sought
NOKIA is in advanced talks to acquire Alcatel-Lucent in the Finnish telecoms-equipment maker’s biggest ever acquisition that could value the French rival at more than $13 billion (R157bn).
The combination would be in a public exchange offer by Finland-based Nokia for Parisbased Alcatel, the companies said yesterday.
Alcatel shares gained as much as 18 percent in the French capital. Nokia fell as much as 8.3 percent on the Helsinki exchange.
Competing
The companies make networking equipment such as base stations and antennas that transmit cellphone calls and data, competing against Sweden’s Ericsson and Huawei Technologies of China.
By acquiring Alcatel, Nokia chief executive Rajeev Suri would bolster the Finnish supplier’s position in China, a market with some 1.3 billion wireless subscribers, and take on some contracts with the two biggest US carriers – Verizon Communications and AT&T.
No agreement had been reached and a deal could still fall apart, the companies said.
Nokia executives were seeking to secure French state backing for a deal, a person familiar with the matter said. Any deal would need a green light from President Francois Hollande’s government, which has previously tried to block corporate mergers in the country.
French government officials were working with advisers on a transaction that would protect some domestic research jobs, people familiar with the matter said.
A French government official declined to comment.
Shares of Nokia lost 6.7 percent to € 7.25 (R92.67) in the morning Helsinki, after dropping as low as € 7.13. Alcatel rose 13 percent to € 4.38 in Paris, after rising as high as € 4.57.
Alexander Peterc, an analyst at Exane BNP Paribas, said Alcatel could be worth € 4.50 per share in a sale, which would value the company’s equity at € 12.7bn.
A planned disposal of Nokia’s maps business, Here, has led analysts to speculate that the proceeds could be used to help pay for acquisitions. Bloomberg News reported on Friday that Nokia was exploring a sale of Here.
Consolidation has dominated conversations in the network-equipment industry for at least the past five years, as price wars drag profits down and carriers reduce spending on infrastructure amid sluggish revenue.
Suri and Alcatel chief executive Michel Combes have eliminated jobs and focused on more profitable contracts.
Talks between Nokia and Alcatel have been on and off in the past.
Alcatel shares had more than tripled in the past two years as the company underwent a restructuring.
Nokia has more than doubled since it agreed to sell its cellphone business to Microsoft in 2013 for about $7.5bn. Nokia’s € 5bn in net cash can also help the Finnish company finance any transaction.
Under Combes, Alcatel has pushed to sell more equipment to the likes of Google and Amazon and become less reliant on carriers. It has reinforced product offerings for landline networks, from routers to a variety of equipment used in services such as cloud computing.