Heralding the birth of a global telecommunications equipment giant, Nokia of Finland announced plans on Wednesday to acquire Alcatel Lucent of France in a stock deal valued at US$16.6 billion. Signed one year after the sale of Nokia’s handset division to Microsoft, the pact represents a watershed development as Nokia continues to transform itself from a one-time leader in global handset sales into a global force in the production of network equipment. Upon completion of the transaction, the combined entity would be outranked only by Sweden’s Ericsson as the world’s second-largest manufacturer of telecom network gear, with annual revenues of $27 billion and operations throughout Europe, Asia and North America. The merger partners also anticipate annual cost synergies of up to $1 billion by 2019.
Under the terms of the deal, Alcatel stockholders would exchange each of their shares for 0.55 shares of Nokia stock, thus leaving Nokia and Alcatel with respective stakes of 66.5% and 33.5% in the combined entity. Although the unified company will be headquartered in Finland under current Nokia CEO Rajev Suri, Nokia said it would continue to maintain Alcatel’s French research facilities and would also nominate a vice chairman from Alcatel. Contingent upon receipt of shareholder and regulatory approvals, the parties aim to complete the transaction during the first half of 2016. As Alcatel CEO Michel Combes observed that the deal “comes at the right time to strengthen the European technology industry,” Suri told reporters that Nokia and Alcatel “intend to lead in next-generation network technology and services.”