Nokia to buy Siemens’ share in joint venture for €1.7 bn
Deal will give the Finnish company full access to the phone- equipment manufacturer’s cash flow and control over its future ownership
Nokia is to acquire Siemens’s 50 per cent stake in Nokia Siemens Networks. Photograph: Dave Thompson/PA Wire
Nokia has agreed to buy Siemens AG’s share in their six-year venture for €1.7 billion, giving the Finnish company full access to the phone-equipment manufacturer’s cash flow and control over its future ownership.
Nokia will pay €1.2 billion for Siemens’s 50 per cent stake in Nokia Siemens Networks, with the remainder as a secured loan from Siemens due a year after the deal is completed, the companies said today.
Nokia, fighting to come back in the smartphone industry, doesn’t plan to integrate Nokia Siemens and may still decide to seek partners, chief executive officer Stephen Elop told a conference call. Nokia shares jumped as much as 10 per cent in Helsinki. The purchase price values the venture, which returned to profit last year, at €3.4 billion.
Siemens has been seeking to exit wireless-gear manufacturing to focus on energy equipment, healthcare and infrastructure projects.
“With this transaction, Nokia buys itself a future, whatever happens in smartphones and feature phones,” said Pierre Ferragu, an analyst at Sanford C. Bernstein in London. “Nokia Siemens has a future in the network equipment world, with a streamlined operation and a No. 2 position in a now concentrated and stable market.”
Nokia rose as much as 29 cents and traded 7.7 per cent higher at €3.07 at 10:13 a.m. in Helsinki, valuing the company at €11.5 billion. Siemens gained 2.4 per cent to €79.49 on the Frankfurt exchange.
Nokia Siemens’s headquarters will stay in Espoo, Finland, and Rajeev Suri will continue to lead the equipment supplier.
Nokia and Siemens, based in Munich, expect to complete the deal in the third quarter.
Unprofitable until early last year, Nokia Siemens’s earnings have improved thanks to cost cuts. The venture is on track to exceed its target of saving 1 billion euros in operating expenses by the end of this year, chief executive officer Suri said in February.
Nokia reported in April its smallest quarterly revenue in 13 years as handset demand waned. Its first-quarter sales fell 20 per cent as competition from Asian manufacturers building phones that run Google Inc.’s Android software hurt demand for Nokia’s basic handsets.
Nokia said today it had net cash of €3.7 billion to €4.2 billion at the end of June, down from €4.5 billion at the end of March. Nokia’s debt is at junk status with the three main rating companies.
In January, Nokia scrapped its dividend for the first time in at least 143 years to bolster liquidity. The deal may help Siemens CEO Peter Loescher, who this year announced the fourth profit forecast cut in his six-year tenure, to reach a target for matching profitability at General Electric Co. and ABB Ltd.