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Nokia and Alcatel-Lucent to merge - new company HQ in Finland

Nokia confirmed Wednesday that it has agreed to a complete buyout of French-US rival Alcatel-Lucent. The 15.6 billion euro deal will make it the largest acquisition by the Finnish network-equipment supplier. According to the agreement, the new combined company will have its headquarters on Finnish soil.

Nokian ja Alcatel Lucent logot.
Image: Ben Stansall / Damien Meyer / AFP

Network companies Nokia and Alcatel-Lucent have confirmed their intention to merge, with both signing a memorandum of understanding to that end. The entirety of Alcatel-Lucent shares is valued at 15.6 billion euros. The deal will be finalised in the first half of 2016, the companies announced.

Both companies have approved the merger terms, yet the transaction is subject to approval by the shareholders of Nokia, as well as regulatory approval.

What's in the deal?

Under the agreement, Nokia is offering to buy all shares in Alcatel-Lucent in France and the United States through an exchange agreement. Nokia has offered Alcatel-Lucent shareholders 0.55 shares in the combined company for each of their old shares.

If the offer is taken up, Nokia shareholders will collectively hold 66.5 percent of the new company and Alcatel-Lucent shareholders 33.5 percent.The new company is scheduled to become operational in 2016.

The agreement also comes with some conditions: The new company's headquarters will take on Nokia’s name and remain in Finland and two of Nokia’s top brass will lead the new company – Risto Siilasmaa as Chairman and Rajeev Suri as CEO.

Nokia justifies the merger in terms of geographical presence and complementary product range, saying the buyout will give the new company a strong profile in the North American market, China, Europe and Asia.

In addition, Nokia and Alcatel-Lucent are both promoting the new company's abilities as an innovator. Nokia Technologies would remain a separate company, and its focus would be on licensing new technologies and incubator operations.

Nokia CEO praises deal, Nokia share price drops

Nokia CEO Rajeev Suri said he believes Nokia and Alcatel-Lucent are going to be at the forefront of next generation network technologies and services.

“Our innovation capability will be extraordinary, bringing together the R&D engine of Nokia with that of Alcatel-Lucent and its iconic Bell Labs,” says Suri. “Together, we expect to have the scale to lead in every area in which we choose to compete, drive profitable growth, meet the needs of global customers, develop new technologies, build on our successful intellectual property licensing, and create value for our shareholders.”

“For all these reasons, I firmly believe that this is the right deal, with the right logic, at the right time," the Nokia CEO concluded.

Nokia shares fell as much as 7 percent on Tuesday after it officially announced its interest in loss-making Alcatel-Lucent. Meanwhile, the French-US firm's share price leaped 16 percent.

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