It has now been confirmed that Nokia will purchase one of its rival networks, Alcatel-Lucent, for about $16.6 billion in stock. That’s a decent sum of money for Nokia to be spending, but it should help them in several ways.
The boards of both companies have already approved the deal, however they are still awaiting regulators to clear the deal. Nokia says that they expect the deal to be fully completed some time in 2016 if all goes as they are planning that it will.
What Nokia is doing by purchasing Alcatel-Lucent is beefing itself up so that it can compete considerably more against the market leader, Ericsson, and to hopefully bring some new things to the table in the telecom equipment business market.
The combined company will have about 114,000 employees and combined sales of around 26 billion euros. In mobile equipment it will rank a strong second, with global market share of 35 percent, behind Sweden’s Ericsson with 40 percent and ahead of Huawei’s 20 percent, according to Bernstein Research.
Since this appears to be a deal completely done with stock and no cash is exchanging hands, the details of the deal are as follows. Nokia will give Alcatel-Lucent shareholders 0.55 shares in the combined company for each of their old shares, putting 33.5 percent of the entity in Alcatel shareholders’ hands if the tender offer is fully taken up. This also means that if and when the deal is finalized that Nokia shareholders will own 66.5% of shares in Alcatel-Lucent
The deal will be finalized in the first half of 2016 and is expected to result in 900 million euros of operating cost savings by the end of 2019, the companies said on Wednesday.
Nokia is also rumored to be trying to sell off its HERE Maps business but unfortunately no buyers have stepped up as of yet. But this obviously didn’t seem to stop Nokia from spending some cold hard cash for something they felt they needed to help them in the long run to compete in markets that they have been strong in for quite some time.