New Nokia Equipped to Make a Deal With Alcatel-Lucent: Real M&A
2015-04-13 22:31:52.709 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle and Adam Ewing
(Bloomberg) -- As Nokia Oyj reemerges as a contender in the
telecommunications industry, it’s never been in a better
position to acquire all or part of Alcatel-Lucent SA.
Nokia has transformed itself from a fumbling mobile-phone
maker into a slimmer company focused on wireless networking. The
stock has tripled in two years amid the comeback. Now, it’s in
advanced negotiations to buy Alcatel-Lucent’s wireless assets,
though a full takeover has also been examined, people familiar
with the matter said.
If it wanted to buy the whole company, Nokia’s stock is
almost 40 percent more valuable than Alcatel-Lucent’s. That
makes a cash-and-stock bid feasible and accretive to earnings,
according to data compiled by Bloomberg. And its coffers are
growing: The Finnish company sold its devices unit to Microsoft
Corp. last year for about $7.5 billion, and it’s said to be
exploring a sale of the $2 billion maps business next.
Whether Nokia goes after the whole company or just the
wireless assets of its $11.5 billion French rival, it will need
to make a persuasive offer. They’ve held talks in the past that
didn’t go anywhere.
“Nokia thinks it’s worth X, and Alcatel thinks it’s worth
Y,” Mike Walkley, an analyst for Canaccord Genuity Group Inc.,
said in a phone interview, adding that he sees a deal for the
wireless assets as most likely. “Nokia has a strong balance
sheet, but they’re going to stick to their guns. It’s going to
come down to, do they close the gap on the valuation?”
Mobile Customers
Nokia may announce an agreement to buy the wireless assets
as early as this week, people familiar with the matter said,
asking not to be identified because the discussions are private.
The unit had 2014 revenue of 4.7 billion euros ($5 billion).
Representatives for Nokia and Alcatel-Lucent declined to
comment on the talks.
Acquiring Alcatel-Lucent’s wireless assets would give Nokia
networks that serve some 1.3 billion mobile subscribers in China
and contracts with the two biggest U.S. carriers -- Verizon
Communications Inc. and AT&T Inc. But Alcatel-Lucent’s core
networking-equipment segment, which includes its IP routing
business, would expand Nokia’s portfolio at a time when
efficiently transferring the booming amount of data from
services such as Netflix is crucial.
Together, Verizon and AT&T account for 25 percent of
Alcatel-Lucent’s revenue, whereas Nokia’s top customers are in
Asia and Europe -- China Mobile Ltd., SoftBank Corp. and
Telefonica SA, according to data compiled by Bloomberg.
Combined Company
A combination of Nokia and all of Alcatel-Lucent would
create the world’s second-largest manufacturer of network
equipment, smaller than Swedish market leader Ericsson AB but
ahead of China’s Huawei Technologies Co.
Nokia shares closed on Monday in Europe with a 36 percent
valuation premium to Alcatel-Lucent, based on earnings before
interest, taxes, depreciation and amortization. That gives it
plenty of firepower to make a cash-and-stock bid. Nokia’s
American depositary receipts later surged as much as 3.9 percent
in New York, while Alcatel-Lucent’s ADRs rallied as much as 11
percent.
If Nokia were to pay a hypothetical 30 percent premium,
with half in cash and half in stock, the deal would increase
next year’s earnings, according to data compiled by Bloomberg.
For Related News and Information:
Nokia Said in Advanced Talks to Acquire Alcatel-Lucent Assets
Nokia Said to Weigh Sale of Maps Unit to Focus on Networks
Nokia Record Cash Makes Alcatel Wireless Unit a Target: Real M&A
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
Merger accretion calculator: MRGC <GO>
BI, data networking equipment dashboard: BI NETW <GO>
--With assistance from Francois de Beaupuy and Marie Mawad in
Paris and Jeffrey McCracken in New York.
To contact the reporters on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net;
Adam Ewing in Stockholm at +46-8-610-0706 or
aewing5@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net;
Kenneth Wong at +49-30-70010-6215 or
kwong11@bloomberg.net
Elizabeth Wollman
2015-04-13 22:31:52.709 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle and Adam Ewing
(Bloomberg) -- As Nokia Oyj reemerges as a contender in the
telecommunications industry, it’s never been in a better
position to acquire all or part of Alcatel-Lucent SA.
Nokia has transformed itself from a fumbling mobile-phone
maker into a slimmer company focused on wireless networking. The
stock has tripled in two years amid the comeback. Now, it’s in
advanced negotiations to buy Alcatel-Lucent’s wireless assets,
though a full takeover has also been examined, people familiar
with the matter said.
If it wanted to buy the whole company, Nokia’s stock is
almost 40 percent more valuable than Alcatel-Lucent’s. That
makes a cash-and-stock bid feasible and accretive to earnings,
according to data compiled by Bloomberg. And its coffers are
growing: The Finnish company sold its devices unit to Microsoft
Corp. last year for about $7.5 billion, and it’s said to be
exploring a sale of the $2 billion maps business next.
Whether Nokia goes after the whole company or just the
wireless assets of its $11.5 billion French rival, it will need
to make a persuasive offer. They’ve held talks in the past that
didn’t go anywhere.
“Nokia thinks it’s worth X, and Alcatel thinks it’s worth
Y,” Mike Walkley, an analyst for Canaccord Genuity Group Inc.,
said in a phone interview, adding that he sees a deal for the
wireless assets as most likely. “Nokia has a strong balance
sheet, but they’re going to stick to their guns. It’s going to
come down to, do they close the gap on the valuation?”
Mobile Customers
Nokia may announce an agreement to buy the wireless assets
as early as this week, people familiar with the matter said,
asking not to be identified because the discussions are private.
The unit had 2014 revenue of 4.7 billion euros ($5 billion).
Representatives for Nokia and Alcatel-Lucent declined to
comment on the talks.
Acquiring Alcatel-Lucent’s wireless assets would give Nokia
networks that serve some 1.3 billion mobile subscribers in China
and contracts with the two biggest U.S. carriers -- Verizon
Communications Inc. and AT&T Inc. But Alcatel-Lucent’s core
networking-equipment segment, which includes its IP routing
business, would expand Nokia’s portfolio at a time when
efficiently transferring the booming amount of data from
services such as Netflix is crucial.
Together, Verizon and AT&T account for 25 percent of
Alcatel-Lucent’s revenue, whereas Nokia’s top customers are in
Asia and Europe -- China Mobile Ltd., SoftBank Corp. and
Telefonica SA, according to data compiled by Bloomberg.
Combined Company
A combination of Nokia and all of Alcatel-Lucent would
create the world’s second-largest manufacturer of network
equipment, smaller than Swedish market leader Ericsson AB but
ahead of China’s Huawei Technologies Co.
Nokia shares closed on Monday in Europe with a 36 percent
valuation premium to Alcatel-Lucent, based on earnings before
interest, taxes, depreciation and amortization. That gives it
plenty of firepower to make a cash-and-stock bid. Nokia’s
American depositary receipts later surged as much as 3.9 percent
in New York, while Alcatel-Lucent’s ADRs rallied as much as 11
percent.
If Nokia were to pay a hypothetical 30 percent premium,
with half in cash and half in stock, the deal would increase
next year’s earnings, according to data compiled by Bloomberg.
For Related News and Information:
Nokia Said in Advanced Talks to Acquire Alcatel-Lucent Assets
Nokia Said to Weigh Sale of Maps Unit to Focus on Networks
Nokia Record Cash Makes Alcatel Wireless Unit a Target: Real M&A
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
Merger accretion calculator: MRGC <GO>
BI, data networking equipment dashboard: BI NETW <GO>
--With assistance from Francois de Beaupuy and Marie Mawad in
Paris and Jeffrey McCracken in New York.
To contact the reporters on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net;
Adam Ewing in Stockholm at +46-8-610-0706 or
aewing5@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net;
Kenneth Wong at +49-30-70010-6215 or
kwong11@bloomberg.net
Elizabeth Wollman