Nokia set to acquire Alcatel-Luent

In a bid to resuscitate its dwindling business fortunes and market relevance, foremost mobile technology brand, Nokia Corporation, has initiated the process to acquire the telecom equipment manufacturer, Alcatel-Luent.

In a joint statement issued by the Finnish and French companies yesterday, the two companies were said to be in “advanced discussions” on a “full combination, which would take the form of a public exchange offer by Nokia for Alcatel-Lucent.”

According to the statement, “The combined company will be uniquely positioned to create the foundation of seamless connectivity for people and things wherever they are. This foundation is essential for enabling the next wave of technological change, including the Internet of Things and transition to the cloud. With more than 40,000 R&D employees and spend of €4.7 billion in R&D in 2014, the combined company will be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging.”

The deal will solidify Nokia’s ambitions to become a major provider of networking equipment that competes with market leader Ericsson, following the sale of its mobile hardware division to Microsoft. The Finnish company 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 shareholders’ hands if the tender offer is fully taken up.

The deal will be 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.

An elated Nokia CEO Rajeev Suri sought to reassure investors by saying he had learned from the past.

“This is not a joint venture, so there will be no governance issues. We will take a no politics, no nonsense approach to running the business, and have learned from past mistakes.”

However, this new deal is not without its misgivings especially from the French government who fears that Nokia may likely retrench some of the workers from Alcatel-Luent in order to reduce its workforce. President Francois Hollande fears that the talks, if successful, would result to severe job cut of over 6,000 employees of Alcatel-Luent and have political implications and has therefore invited Nokia Chief Executive Rajeev Suri and Alcatel-Lucent boss Michel Combes, for discussion over the talks.