Nokia and Alcatel-Lucent announced their intention to merge to become a leader in next generation technology and services for an IP connected world.
Highlights of Nokia and Alcatel-Lucent merger
# Alcatel-Lucent will be valued at EUR 15.6 billion
# The combined company will be known as Nokia Corporation
# It will have more than 40 000 R&D employees
# Alcatel-Lucent shareholders will own 33.5%, Nokia shareholders would own 66.5%
# Risto Siilasmaa will be Chairman
# Rajeev Suri will be CEO
# Combined company targets approximately EUR 900 million of operating cost synergies
# On a FY 2014 combined basis, the proposed company would have had net sales of EUR 25.9 billion
The all-share transaction values Alcatel-Lucent at EUR 15.6 billion.
The combined company — known as Nokia Corporation — will have capabilities for enabling the next wave of technological change, including the Internet of Things and transition to the cloud.
The combined company will have better innovation capabilities, with Alcatel-Lucent’s Bell Labs and Nokia’s FutureWorks, as well as Nokia Technologies, which will stay as a separate entity with a clear focus on licensing and the incubation of new technologies.
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.
Alcatel-Lucent and Nokia have strength in the United States, China, Europe and Asia-Pacific. They will also bring together the best of fixed and mobile broadband, IP routing, core networks, cloud applications and services.
Consumers are looking to access data, voice and video across networks of all kinds. In this environment technology that used to operate independently now needs to work well together. Nokia and Alcatel-Lucent are uniquely suited to helping telecom operators, internet players and large enterprises address this challenge.
The offer values Alcatel-Lucent at EUR 15.6 billion on a fully diluted basis.
Alcatel-Lucent shareholders would own 33.5 percent of the fully diluted share capital of the combined company, and Nokia shareholders would own 66.5 percent, assuming full acceptance of the public exchange offer.
The combined company will be called Nokia Corporation, with headquarters in Finland and a strong presence in France. Risto Siilasmaa is planned to serve as Chairman, and Rajeev Suri as chief executive officer.
The combined company’s Board of Directors is planned to have nine or ten members, including three members from Alcatel-Lucent, one of whom would serve as vice chairman.
The combined company would target approximately EUR 900 million of operating cost synergies to be achieved on a full year basis in 2019.
The combined company would target approximately EUR 200 million of reductions in interest expenses to be achieved on a full year basis in 2017.
The transaction is expected to be accretive to Nokia earnings on a non-IFRS basis (excluding restructuring charges and amortisation of intangibles) in 2017.
On a FY 2014 combined basis, the proposed 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, and R&D investments of approximately EUR 4.7 billion.
Rajeev Suri, president and chief executive officer of Nokia, said: “We have hugely complementary technologies and the comprehensive portfolio necessary to enable the internet of things and transition to the cloud. We will have a strong presence in every part of the world, including leading positions in the United States and China.”
Michel Combes, chief executive officer of Alcatel-Lucent, said: “A combination of Nokia and Alcatel-Lucent will offer a unique opportunity to create a European champion and global leader in ultra-broadband, IP networking and cloud applications.”
Based on Nokia estimates, the addressable market of the combined company in 2014 was approximately 50 percent larger than the current addressable networks market for Nokia alone, 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 percent for 2014-2019.
The combined company would target approximately EUR 900 million of operating cost synergies to be achieved on a full year basis in 2019, assuming closing of the transaction in the first half of 2016. The operating cost synergies are expected to create a long-term structural cost advantage, coming from a wide-range of areas.