Nokia and Alcatel-Lucent reached an agreement on the terms of their proposed merger. Nokia will offer 0.55 of its shares for each Alcatel-Lucent share, valuing the company at EUR 15.6 billion or EUR 4.27 per share. This is a premium of 28 percent to the average share price over the three months before the merger talks were announced. Alcatel-Lucent shareholders would own 33.5 percent of the new company, which will continue under the name Nokia.
Nokia's current chairman and CEO, Risto Siilasmaa and Rajeev Suri, will continue to lead the company, and the new Nokia will remain headquartered in Finland with a "strong presence" in France. Alcatel-Lucent will have three members on the board of 9-10 members, including the role of vice chairman.
Pending approval by Nokia's shareholders and regulators, the takeover is expected to close in the first half of 2016. By 2019, the companies expect to achieve EUR 900 million in operating cost savings from the merger, mainly from reducing overlap and improved procurement. They also target EUR 200 million in savings on interest costs by 2017 and to maintain an investment-grade credit rating. Until the completion of the merger, Nokia said it's suspending its share buyback programme. It will also spend EUR 750 million to pay off a convertible bond early in Q4 this year and make an offer to buy Alcatel-Lucent's Oceane convertible bonds.
The combined group had on a pro forma basis 2014 sales of EUR 25.9 billion, adjusted operating profit of EUR 2.3 billion, reported operating profit of EUR 0.3 billion and net cash of EUR 7.4 billion at year-end. The cash position should be further improved by Nokia's planned sale of its mapping division Here, which it confirmed is up for sale.
Nokia said the takeover will expand its total addressable market by 50 percent to EUR 130 billion and raise the potential market growth to 3.5 percent per year over the period 2014-2019. In addition, the merged group will have increased R&D capacity, with double the research workforce of 40,000 and R&D investments of EUR 4.7 billion last year.
As part of the transaction, Nokia agreed to maintain a 5G/small cells research lab in France, as well as a French cybersecurity lab similar to its existing facility in Berlin in order to support European collaboration on the topic. It will also set up a EUR 100 million investment fund to support French start-ups involved in the Internet of Things and Industrial Internet. Overall employment in France will be maintained after the merger at the same levels as under Alcatel-Lucent's 'Shift Plan', with a focus on the key sites of Villarcreux outside Paris and Lannion in Brittany.
Nokia also pledged to continue the company's commitment to the Bell Labs research department based in the US and the Chinese venture Alcatel-Lucent Shanghai Bell. With the takeover, Nokia's position in both the US and China markets will be significantly strengthened.
