Nokia To Buy Alcatel-Lucent For $16.6 Bln In Stock

(RTTNews) - Finnish network equipment maker Nokia (NOK) and French telecom equipment maker Alcatel-Lucent (ALU) agreed Wednesday to a deal whereby Nokia will make an offer for all of the equity securities issued by Alcatel-Lucent, through a public exchange offer in France and in the U.S. in a deal that values Alcatel-Lucent at 15.6 billion euros or $16.6 billion on a fully diluted basis.

For long, Alcatel-Lucent and Nokia have had merger talks, but without any conclusive results. The two companies had confirmed on Tuesday that they were in advanced discussions regarding a potential full combination, which would take the form of a public exchange offer by Nokia for Alcatel-Lucent.

As per the deal, 0.55 of a newly issued ordinary share of Nokia will be offered for every Alcatel-Lucent ordinary share and American Depositary Share.

The proposed deal would create a European champion and global leader in ultra-broadband, IP networking and cloud applications, with the combined company reinforcing its presence in the U.S. and China.

Nokia has been struggling to spur growth at its telecommunication network equipment business, and to stay trim, had divested its struggling handset business to Microsoft Corp. (MSFT) for about $7 billion.

The network equipment industry has been suffering for years under enormous competitive pressure. Under Chief Executive Rajeev Suri, Nokia has cut jobs, a path Alcatel-Lucent too has taken, including asset sales.

The deal, approved by the Boards of Directors of both companies, is expected to close in the first half of 2016.

The offer is valued at 4.27 per share, based on Nokia's unaffected closing share price of 7.77 euros on Monday, and represents a 10.6 percent premium over Alcatel-Lucent's unaffected closing share price of 3.86 euros on Monday in Paris.

Nokia said it expects the deal to add to its earnings in 2017 on a non-IFRS basis, excluding restructuring charges and amortization of intangibles. The combined company would also target about 900 million euros of operating cost synergies to be achieved on a full year basis in 2019.

Following the closure of the deal, Alcatel-Lucent shareholders would own 33.5 percent of the fully diluted share capital of the combined company, and Nokia shareholders would own 66.5 percent, assuming full acceptance of the public exchange offer.

The combined company will be called Nokia Corp., with headquarters in Finland and a strong presence in France. Nokia intends to retain the Bell Labs brand to host its networks-focused innovation activities. Nokia Chairman Risto Siilasmaa is planned to serve as Chairman of the combined company, and Suri as CEO.

The combined company's Board of Directors is planned to have nine or ten members, including three members from Alcatel-Lucent, one of whom would serve as Vice Chairman.

Alcatel-Lucent and Nokia have highly complementary portfolios and geographies, with particular strength in the United States, China, Europe and Asia-Pacific.

Nokia announced it will suspend its capital structure optimization program, including suspending the share repurchase program, effective immediately until the closing of the transaction.

Nokia also maintained its dividend proposalof 0.14 euros for the year ended December 31, 2014.

Separately, Nokia also announced that the company has initiated a review of strategic options, including a potential divestment, for its HERE business.

NOK closed Tuesday's regular trading session at $7.86, down $0.10 on a volume of 80.13 million shares, while ALU closed at $4.93, up $0.18 on a volume of 82.54 million shares.