Nokia buys Alcatel-Lucent to grow in Telecom Gear

Finnish telecom network equipment maker Nokia has agreed to buy Alcatel-Lucent in an all-share transaction that values its smaller French rival at 15.6 billion euros ($16.6 billion).

Nokia will give Alcatel-Lucent shareholders 0.55 shares in the combined company for each of their old shares, resulting in 33.5 percent of the entity being in Alcatel’s hands and Nokia having 66.5 percent if the public exchange offer is fully taken up.

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 pledged to keep France as “a vibrant center of the combined company” and not to cut jobs beyond what Alcatel had already planned, especially protecting research and development sites at Villarceaux and Lannion.

Alcatel-Lucent has some 6,000 employees in France. Maintaining jobs was a key demand of the French state for its backing of the deal.

Nokia’s takeover of Alcatel-Lucent will help it better take on mobile leader Sweden’s Ericsson and low-cost powerhouse China’s Huawei [HWT.UL] amid weak growth prospects in the telecom gear industry.

It will have stronger exposure to the important North American market, with key contracts with AT&T and Verizon and a fast-growing Internet routing business.

“The combined company is expected to have a stronger growth profile than Nokia’s current addressable market,” Nokia said, predicting a sales growth rate of about 3.5 percent for 2014 to 2019.

Source: Reuters