Nokia Corporation (ADR) (NYSE:NOK) and China Huaxin Post & Telecommunication Economy Development Center (“China Huaxin”) have signed a memorandum of understanding (“MoU”) today confirming their intention to combine Nokia’s telecommunications infrastructure businesses in China (“Nokia China”) and Alcatel-Lucent Shanghai Bell (“ASB”) into a new joint venture. As agreed under the MoU, Nokia expects to hold 50% plus one share in the new joint venture, with China Huaxin holding the remaining shares. Fair value compensation would be received for the contribution of relevant assets to the joint venture.
The new joint venture is conditional on and would be formed after the closing of Nokia’s planned combination with Alcatel-Lucent, at which point Nokia would own 50% plus one share of ASB. The new joint venture is expected to be a strong national asset based in China capable of delivering value for both parties. Nokia China and ASB are leaders in the Chinese telecommunications infrastructure market and both are long-standing contributors to the development of China and innovation in the country.
The new joint venture is planned to operate under the English name of Nokia Shanghai Bell and would be registered in the China (Shanghai) Pilot Free Trade Zone. The new joint venture would have one board of directors, one management team, unified customer and business functions, and one integrated product portfolio and R&D platform.
Rajeev Suri, President and CEO of Nokia Corporation, said: “Today’s agreement demonstrates Nokia’s deep commitment to China. Together with China Huaxin, Nokia will be in an excellent position to support strategic initiatives of the Chinese government such as “Internet Plus” and provide a strong link between Europe and China. We look forward to joining with China Huaxin and ASB to drive innovation for customers in China and to help accelerate the country’s shift to an innovation-driven economy. With this MoU now in place, we will also work closely with our new partners to make the case for swift approval of the proposed combination between Nokia and Alcatel-Lucent by the appropriate Chinese authorities.”
Yuan Xin, Chairman, China Huaxin, said: “We are pleased to have signed this agreement with Nokia, and firmly believe the proposed combination would reinforce our companies’ presence in China. By bringing these two entities together, the new company would possess greater capacity for innovation and outstanding R&D capabilities, delivering benefits to our customers and shareholders alike.”
As agreed in the MoU, Nokia and China Huaxin will negotiate the final terms of how the new joint venture would be created. A deadlock mechanism exists within the MoU to ensure final agreement is reached between Nokia and China Huaxin regarding the terms of transfer and valuation of all relevant assets. This mechanism would deliver a resolution if definitive agreement has not been reached within nine months after completion of Nokia’s proposed combination with Alcatel-Lucent.
Until the closing of the proposed combination between Nokia and Alcatel-Lucent, Nokia China and ASB will continue to operate as two independent companies. (Original Source)
Shares of Nokia Corp closed yesterday at $6.32. NOK has a 1-year high of $8.73 and a 1-year low of $5.71. The stock’s 50-day moving average is $6.63 and its 200-day moving average is $7.16.
On the ratings front, Nokia has been the subject of a number of recent research reports. In a report issued on August 3, Raymond James analyst Simon Leopold reiterated a Sell rating on NOK. Separately, on July 30, Canaccord Genuity’s Michael Walkley reiterated a Buy rating on the stock and has a price target of $10.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Simon Leopold and Michael Walkley have a total average return of 5.5% and 17.6% respectively. Leopold has a success rate of 61.8% and is ranked #892 out of 3741 analysts, while Walkley has a success rate of 58.8% and is ranked #20.
The street is mostly Neutral on NOK stock. Out of 11 analysts who cover the stock, 7 suggest a Hold rating and 4 recommend to Buy the stock. The 12-month average price target assigned to the stock is $8.60, which implies an upside of 36.1% from current levels.
Nokia Oyj is a mobile communications company. The Company has three business: Networks, HERE, and Technologies and four business segments: mobile Broadband and Global Services within Networks, HERE, and Technologies.