Nokia buys Alcatel Lucent

wellington-bootThe former rubber boot maker Nokia has done what we predicted and written a cheque for the French Alcatel-Lucent.

Well, we say cheque, but it is pretty much an all-share transaction that values its smaller French rival at $16.6 billion.

Nokia will give each Alcatel-Lucent shareholder 0.55 shares in the combined company for each of their old shares. This will mean that 33.5 percent of the new company will be in Alcatel’s hands and Nokia having 66.5 percent.

The deal still has to go through the regulators and there might be a few problems with the French government saying “non.” Alcatel-Lucent is a French success story and the government is not too happy about foreigners who do not know how to cook properly getting their paws on it.

The deal will be finalised in the first half of 2016 and is expected to result in 900 million euro of operating cost savings by the end of 2019, the companies said on Wednesday.

Nokia has promised to keep France as “a vibrant centre of the combined company” and not to cut jobs beyond what Alcatel had already planned, especially protecting research and development sites at Villarceaux and Lannion.

Alcatel-Lucent has some 6,000 employees in France. Maintaining jobs will be a key demand of the French state for its backing of the deal.

Nokia’s takeover of Alcatel-Lucent will put the fear of Odin into mobile leader Sweden’s Ericsson and China’s Huawei which have the market pretty much stitched up like a kipper.

It will have stronger exposure to the important North American market, with key contracts with AT&T and Verizon and a fast-growing Internet routing business.

“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 percent for 2014 to 2019.

The combined company will have a global wireless market share of 35 percent, second only to Ericsson with 40 percent, and ahead of Huawei at 20 percent.