The Big Merger Details
As per the memorandum of understanding (‘MOU’) penned between Alcatel-Lucent and Nokia, the latter will propose an offer for all the shares of Alcatel-Lucent, via a public exchange offer in the United States and France. As per the terms of the MOU, every shareholders of the erstwhile Alcatel-Lucent company will receive 0.55 shares of the newly formed Nokia Corporation, for each share held by them.
The shares of Alcatel-Lucent are priced at EUR 4.27 per share, reflecting a premium of 28% over its closing price on Apr 13. On the assumption of full acceptance of the public exchange offer, Alcatel-Lucent’s shareholders will own 33.5% of the diluted shares of the combined company, while remaining shares will be held by Nokia stakeholders.
The newly created Nokia Corporation, which will be headquartered in Finland, will be led by Rajeev Suri as Chief Executive Officer and Risto Siilasmaa as the Chairman. Both the firms board of directors accepted the terms of the deal and it is anticipated to close in the first half of the next year.
Expected Financial Gains
Upon the completion of the amalgamation, the combined entity is targeting to achieve around EUR 900 million of operating cost synergies in 2019; and about EUR 200 million of reductions in interest expenses in 2017. Moreover, on the basis of combined 2014 results of Alcatel-Lucent and Nokia, the new company is anticipated to have a non-IFRS operating profit of EUR 2.3 billion, a reported operating profit of EUR 0.3 billion, net sales of EUR 25.9 billion and a strong net cash position of EUR 7.4 billion.
The merger is a win-win situation for both Alcatel-Lucent and Nokia, as the newly formed entity will reap synergies from best attributes of both the network solutions providers. While Alcatel-Lucent has a relative advantage in IP-based products, optical networking, cloud computing/software-defined networking, fixed broadband network and professional services, Nokia Networks boasts strong technical efficiency in professional managed services, customer experience management together with a rich portfolio of mobile broadband infrastructure and 4G LTE networks.
The actualization of the deal will open up unequalled innovation possibilities using the unification of the supreme minds of Alcatel-Lucent’s Bell Labs and Nokia’s FutureWorks. Hence, we believe the new Nokia Corporation will be capable of seamlessly driving the next generation technological advancement that entails cloud transition and Internet of Things.Apart from this, both Alcatel-Lucent and Nokia have a strong foothold in the United States, China, Europe and Asia-Pacific, which will aid the new entity in capitalising on growth opportunities in areas like 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging.