Nokia Corp. NOK has announced that the sale of its HERE high-definition (HD) mapping/navigation business will be completed this week. The company will sell the business to a consortium of German automakers consisting of BMW, Daimler and Volkswagen (owner of Audi) for a consideration of €2.8 billion (approximately $3.1 billion).
Nokia stated that the proposed deal has cleared all necessary regulatory approvals and is set to be closed much earlier than the previously declared time frame of first-quarter 2016. The company expects to receive €2.5 billion as net proceeds after adjusting the € 300 million of liabilities for the HERE division.
Initially, three consortiums had placed bids for the HERE unit. Apart from the consortium formed by the German automakers, U.S.-based taxi operator Uber and China’s Baidu had collaborated to bid for HERE. The third consortium had been formed by Chinese media, mobile and Internet services provider Tencent, Chinese map developer NavInfo and Swedish buyout firm EQT Partners AB.
However, eventually, Uber-Baidu and the consortium of Chinese media, mobile and Internet services providers exited the bidding process. This placed the German automakers-backed consortium in a favorable position to bargain with Nokia for HERE. Initially, Nokia was expecting to receive €2 – €4 billion (about $2.2 – $4.4 billion) for the HERE segment.
Nokia’s HERE competes intensely with the Alphabet Inc.’s GOOGL map business. Analysts estimate that self-driven and connected car services have the potential to become a $50 billion market opportunity in the near future.
Over the last couple of years, Nokia has been restructuring its entire business model. In 2014, the company sold its mobile device and service division, which was its largest business unit, to Microsoft Corp. MSFT for $7.2 billion.
After the disinvestment of the HERE division, Nokia Networks, which provides wireless infrastructure gears and solutions, will be the sole business left at the company. Meanwhile, the proceeds from the HERE sale will be utilized for Nokia’s proposed acquisition of Alcatel-Lucent ALU.
Nokia currently carries a Zacks Rank #3 (Hold).
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