Friday, July 24, 2015

European Commission Approves Alcatel-Lucent + Nokia Merger

The European Commission gave its stamp of approval to the proposed acquisition of Alcatel-Lucent by Nokia, saying the merger does not raise competition concerns "because the parties are not close competitors and since a number of strong global competitors will remain active after the transaction."

The Commission said it considered the effects of the merger on competition in the field of mobile network equipment, including Radio Access Network equipment and Core Network Systems. The Commission found that, despite the merged entity having combined market shares around or above 30% for several specific types of equipment, the overlaps between the two companies' activities are effectively limited. Indeed, Nokia has a strong presence in the European Economic Area, where Alcatel-Lucent is a small player, and conversely Alcatel-Lucent has a strong presence in North America, where Nokia's activities are rather limited.

The EC cited competition from Ericsson and Huawei, along with the emerging presence of ZTE and Samsung, especially with regards to upcoming 5G.

http://europa.eu/rapid/press-release_IP-15-5437_en.htm

Nokia to Acquire Alcatel-Lucent for EUR 15.6 billion


Nokia agreed to acquire Alcatel-Lucent in a deal valued at EUR 15.6 billion -- a premium to shareholders of 28% (equivalent to EUR 4.27 per share) over the unaffected weighted average share price of Alcatel-Lucent for the previous three months.  Under the transaction Nokia will make an offer for all of the equity securities issued by Alcatel-Lucent, through a public exchange offer in France and in the United States, on the basis of 0.55 of a new Nokia share for every Alcatel-Lucent share. The boards of directors of both companies have agreed to the deal.

Nokia said it was motivated to do the deal because the addressable market of the combined company in 2014 was approximately 50% larger than its current addressable networks market, 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.

Some highlights:


  • The combined company will be called Nokia Corporation, with headquarters in Espoo, Finland and a strong presence in France. It will also have major R&D centers in Germany, the U.S. and China. It will retain its Bell Labs brand in the U.S..
  • For France, Nokia said intends to maintain employment levels consistent with Alcatel-Lucent’s end-2015 Shift Plan commitments, with a particular focus on the key sites of Villarceaux (Essonne) and Lannion (CĂ´tes d’Armor).  Plans also include a 5G R&D centre of excellence in France.
  • Risto Siilasmaa is planned to serve as Chairman, and Rajeev Suri as Chief Executive Officer.
  • The combined company would target approximately EUR 900 million of operating cost synergies to be achieved on a full year basis in 2019. The cost savings will come from organizational downsizing, elimination of overlapping products and services, centralized functions and regional sales organizations. The combined company could reduce overhead costs in real estate, manufacturing, supply chains, IT and overall G&A expenses, including public company costs.
  • The combined company would target approximately EUR 200 million of reductions in interest expenses to be achieved on a full year basis in 2017.
  • For FY 2014, the combined company would have had net sales of EUR 25.9 billion, a non-IFRS operating profit of EUR 2.3 billion, a reported operating profit of EUR 0.3 billion, R&D investments of approximately EUR 4.7 billion, and a strong balance sheet with combined net cash at  December 31, 2014 of EUR 7.4 billion.
  • For comparison in FY 2014, Ericsson had carrier revenues of approximately EUR 25.1 billion, Huawei had EUR 23.5 billion and Cisco had EUR 9.0 billion.
  • In China, Nokia would own Alcatel-Lucent’s 50% plus one share holding in Alcatel-Lucent Shanghai Bell, a company limited by shares supervised by the State-owned Assets Supervision and Administration Commission of China.  

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