Nokia Networks, a division of Nokia Corp. NOK has cleared a major regulatory hurdle with regard to its proposed € 15.6 billion (approximately $16.6 billion) acquisition of Alcatel-Lucent SA ALU. Yesterday, at an extraordinary general meeting convened by Nokia, the company’s shareholders overwhelmingly endorsed the deal. The board of directors at Alcatel-Lucent has already given a thumbs-up to this transaction. The proposed merger is expected to close in the first half of 2016.
The deal still requires more than half of Alcatel-Lucent’s shareholders to tender their shares and convertible bonds. In this regard, last month, Nokia Networks filed with French stock market regulator AMF, its public exchange offer for all the outstanding ordinary shares, American depositary shares (ADS) and OCEANE convertible bonds of Alcatel-Lucent.
The French offer will remain open from Nov. 18 through Dec. 23, and will be settled on Jan 7, 2016. Euronext Paris has already approved the listing and trading of the 3.955 million outstanding ordinary shares of Nokia with effect from Nov. 19, 2015. The reference price will be the closing price of Nokia's shares on Nasdaq OMX Helsinki on Nov. 18, 2015. Existing Nokia shares will thereafter be listed in Helsinki and Paris, and on NYSE through ADS.
During Jul–Sep 2015, Nokia duly received the necessary regulatory approvals from the U.S., the European Union (EU), Serbia, Brazil and China, pertaining to the proposed merger.
Per the agreement, Nokia’s shareholders will command a 66.5% stake in the merged entity while Alcatel-Lucent shareholders will hold the remaining 33.5%. Several analysts have estimated that the combined entity will command about 35% of the global wireless infrastructure market share, close to LM Ericsson’s ERIC estimated 40% hold and far ahead of Huawei Technologies Co. Ltd.’s 20% share.
The acquisition of the wireless business of Alcatel-Lucent will significantly strengthen Nokia’s foothold in North America. Leading U.S. telecom operators, namely, Verizon Communications Inc. VZ and AT&T Inc. T are prominent customers of Alcatel-Lucent. Notably, in 2014, the wireless division of Alcatel-Lucent generated around $5 billion in sales. Of the total, Verizon and AT&T jointly contributed more than 25%. Additionally, Alcatel-Lucent has a strong presence in China while Nokia enjoys considerable dominance in Europe and Asia.
The merged entity can effectively capitalize on the emerging Internet-of-Things (IoT) platform and offer competent triple-play voice, video and data solutions across the world. The core focus areas will be next-generation 5G wireless technology, IP and software, defined networking, cloud-based solutions, big data analytics, and sensors and imaging.
The full takeover of Alcatel-Lucent by Nokia will create a network solutions behemoth in the industry with a significant global customer base and solid operational efficiencies. Nokia boasts strong technical expertise in professional managed services and customer experience management apart from a rich portfolio of mobile broadband infrastructure and 4G LTE network.
On the other hand, Alcatel-Lucent enjoys relative advantage in IP-based products, optical networking, cloud computing/software-defined networking, fixed broadband network and professional services.
Both Nokia and Alcatel-Lucent currently carry a Zacks Rank #3 (Hold).
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