Potential merger still has to pass muster with foreign regulators
WASHINGTON – Following months of speculation and a long and complex process, a merger between Nokia and Alcatel-Lucent is one very large step closer to being finalized.
The companies have announced that the U.S. Department of Justice has granted early termination of the domestic antitrust suit waiting period. This action removes any regulatory obstacles in regard to the merger, effectively clearing the way for the companies to move forward, at least as far as the U.S. government is concerned.
Before the merger can be finalized, antitrust hurdles must still be cleared in Brazil and Serbia, and Nokia shareholders still need to give their final OK to the transaction before it can be finalized.
From a joint statement: “Both companies will continue to cooperate with the remaining authorities to close their reviews as quickly as possible.”
The Nokia and Alcatel-Lucent merger is aimed at combining the technical skills and divergent strengths of both firms to make the joint effort more competitive against equipment manufacturing giants Ericson and Huawei, for example.
Mark Newman, chief research officer for advisory firm Ovum, called the potential deal a “logical” move.
“Nokia is a mobile-only equipment vendor, while Alcatel-Lucent’s strengths are in the fixed-network business,” Newman said. “It has long struggled in the wireless business, and its attempts to become a leading player in LTE have failed.”
The merger, if it goes through, would be valued at $16.5 billion cumulatively and the new company will employ over 100,000 people globally. It will remain headquartered in Finland with strategic business and research and development locations in France, Germany, China and the U.S.
Rajeev Suri, current head of Nokia, will continue as CEO of the new company with Nokia Chairman Risto Siilasmaa remaining as chairman of the board.
Despite declining share value, UBS analysts issued a research report on May 8, noting that they believe Nokia “struck a good deal for its shareholders” with Alcatel-Lucent.
The report stated, “From here, there is much to look forward to as an investor in New Nokia – a likely agreement with Samsung around IPR, a possible sale of Here, the extraction of the synergies in the new business and the hidden value we have previously flagged in assets such as Nuage Networks/Core IP routing. At the current share price we believe market based repair of margins are not priced into the stock and represent a free option.”
Now that the merger has cleared U.S. regulatory hurdles, it looks far more likely to go ahead. Nokia and Alcatel-Lucent have estimated the combination of their firms will be completed by 2016.
