Nokia Corporation (ADR) (NOK) In Talks To Buy Alcatel Lucent SA

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Nokia Corporation (ADR) (NOK) In Talks To Buy Alcatel Lucent SA
Hermann / Pixabay

European telecommunications and networking manufacturers Nokia and Alcatel-Lucent announced on Tuesday, April 14th that they were advanced negotiations regarding a possible merger. According to an article in the Wall Street Journal, a deal between these two industry giants would create a global networking behemoth that could effectively compete with sector leaders Ericsson and Huawei Technologies.

The statement noted that the deal currently being negotiated is a “full combination” where Nokia will make a public offer for Alcatel-Lucent shares.

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However, the deal has not been completed and it’s possible that no final agreement can be reached.

More on possible Alcaltel-Lucent and Nokia deal

Analysts note that apparently the firms have not settled on a valuation yet. As of Monday, Alcatel-Lucent’s market capitalization is a little more than €11 billion, while Nokia’s market cap is close to €28 billion.

A Nokia-Alcatel merger would finally put to rest speculation about the two firms, as well as shake up the telecommunications-equipment business by creating a company with total revenues of €26 billion and over 100,000 employees.

Of note, industry leader Ericsson took in revenue of €25.1 billion last year while Huawei’s telephone-carrier equipment business brought in around €23.6 billion.

Just how advanced the negotiations are or when a final deal could be announced remains unclear, but both firms have shareholders meetings scheduled over the next month or so. Nokia will host its annual shareholder meeting on May 5, while Alcatel-Lucent is planning to have its general meeting on May 26th.

Approval for merger from French government could be difficult

An Alcatel-Lucent and Nokia mashup could face antitrust headwinds in France. Although French officials have given lip service to creating pan-European firms to compete globally (a la Airbus), but Alcatel-Lucent is a major employer and thought of as a pillar of French industry.

A government official in France noted that a deal with Alcatel-Lucent would have to assure a significant French influence in the new firm for the deal to be approved.

“The government will be very vigilant regarding the possible consequences on employment and activity at the French sites of Alcatel-Lucent, notably in research and development, as well as the effects on the entire telecoms sector in France,” the French economy ministry said in a statement Tuesday.

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