Nokia to buy telecom equipment maker Alcatel-Lucent

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Nokia has agreed to buy French telecom equipment maker Alcatel-Lucent in an all-stock deal valued at 15.6 billion euros (USD 16.6 billion).

As part of the agreement approved by both companies’ boards, Nokia will issue 0.55 shares of stock for every outstanding Alcatel-Lucent share. This will result in Alcatel shareholders owning 33.5 per cent shares of the new company and Nokia shareholders owning 66.5 per cent.

The deal will get finalised 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. Another 200 million euros reductions in interest expenses a year is expected, starting 2017.

“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% between 2014 and 2019.

After the deal is complete, Nokia will remain based in Finland under existing Chairman Risto Siilasmaa and Chief Executive Rajeev Suri. The revamped Nokia board will have around nine or 10 members, with three, including the vice-chairman, from Alcatel-Lucent.

The combined company will have about 114,000 employees and combined sales of around 26 billion euros.

“Together, Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services, with the scope to create seamless connectivity for people and things wherever they are.”

“Our innovation capability will be extraordinary, bringing together the R&D engine of Nokia with that of Alcatel-Lucent and its iconic Bell Labs.”

“We will continue to combine this strength with the highly efficient, lean operations needed to compete on a global scale,” Nokia President and Chief Executive Officer Rajeev Suri said in a statement.

Nokia also confirmed it is exploring a potential sale of its Here mapping unit, one of three businesses that remained after the company sold its mobile phone unit to Microsoft, which analysts value at up to 6.9 billion euros.

Michel Combes, CEO of Alcatel-Lucent, said the merger will give Nokia Corporation the scale needed for the future.

“This transaction comes at the right time to strengthen the European technology industry. We believe our customers will benefit from our improved innovation capability and incomparable R&D engine under the Bell Labs brand. The global scale and footprint of the new company will reinforce its presence in the United States and China.”

“Shareholders of Alcatel-Lucent now have the opportunity to participate in the future upside of the industrial project that they have supported during the last two years, through a stronger combined business with greater global scale and a better position for the longer term. The new company will also provide our employees exciting opportunities to be part of a global leader.”