Finland’s Nokia has said it has agreed a deal with Alcatel-Lucent to fully take over its Franco-American competitor. The move would create a new global networking giant to rival Sweden’s Ericsson and China’s Huawei.
Nokia announced Wednesday (15.04.2015) it had agreed to take over Alcatel-Lucent in a deal valuing the Franco-American company at 15.6 billion euros (16.6 billion dollars).
“I firmly believe that this is the right deal, with the right logic, at the right time,” Nokia CEO Rajeev Suri said.
Both companies’ boards of directors had given their blessing to the deal, which would help Nokia bolster its mobile infrastructure business against Swedish archrival Ericsson, profiting from Alcatel’s position as a leading supplier of 4G and LTE mobile networks and related services.
Alcatel-Lucent’s market capitalization stands at roughly 11 billion euros ($11.63 billion), while Nokia’s market capitalization is about 28 billion euros.
On Tuesday, Alcatel-Lucent’s shares bounced on the announcement that an agreement was in the works, gaining 13 percent to 4.38 euros per share in morning trading in Paris.
Networking behemoth in the making
A merger between the two companies would end years of speculation about a possible tie-up, and reshape the market for telecommunications equipment.
The new company would have a combined 2014 revenue of 25.9 billion euros and more than 100,000 employees in businesses spanning wireless communications and Internet routing.
Market leader Ericsson reported revenue of 25.1 billion euros in 2014, while the telecoms equipment business of China’s Huawei had revenue of about 23.6 billion euros.
Alcatel-Lucent CEO Michel Combes suggested the combined firm might emphasize the venerable Bell Labs name, which US-based Lucent brought with it when it merged with France’s Alcatel in 2006. Bell Labs originated as the research wing of US telephone company AT&T and is credited with inventions as diverse as the transistor and the UNIX operating system.
“This transaction comes at the right time to strengthen the European technology industry,” Combes said. “We believe our customers will benefit from our improved innovation capability and incomparable R&D engine under the Bell Labs brand.”
According to Bloomberg financial services, Nokia is seeking the blessing of the French government for the purchase and is working with regulators in an attempt to preserve research jobs in France.
Last year, Nokia sold its consumer handset business, once the world’s largest, to Microsoft in order to focus on networking equipment.
The company has also indicated it may be willing to sell its Here mapping division.