Telecom giant Nokia has confirmed today that it is buying competitor Alcatel-Lucent.

The companies have come to an understanding under which Nokia will make an offer for all the equity securities issued by Alcatel-Lucent. The transaction will be through a public exchange offer in France and the US, on the basis of 0.55 a new Nokia share, for every Alcatel-Lucent share.

The move has valued the smaller French retailer at £11.23bn, leaving Alcatel shareholders with 33.5% of the fully dilutes share capital of the combined company, compared to Nokia‘s shareholder who would own 66.5%.

The deal will be finalised in the first half of 2016, with the approval of each company‘s Board of Directors.

Employees at the combined business believe that the venture will lay an ‘essential‘ foundation for the future innovations. In a statement released on Nokia‘s website, the company said that the collaboration will put the combined company in a position to, “accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging”.

Michel Combes, Chief Executive Officer of Alcatel-Lucent added:

“A combination of Nokia and Alcatel-Lucent will offer a unique opportunity to create a European champion and global leader in ultra-broadband, IP networking and cloud applications”

Predictions

If all goes to plan the joint company will target around €900m of operating cost synergies, based on a full year in 2019.

The combined figures for FY2014 suggest that the business will have net sales of 25.9bn, while it will also hold a strong presence in every part of the world:

“We will have a strong presence in every part of the world, including leading positions in the United States and China- Together, we expect to have the scale to lead in every area in which we choose to compete”, said Rajeev Suri, President and Chief Executive Officer of Nokia.

The collaboration  should result in the business exceeding Huawei and Ericsson AB in terms of wireless- infrastructure revenue. 

Nokia is currently based in Finland and has said that it will aim to keep Alcatel-Lucent‘s base in France as a “vibrant centre of the combined company”. It intends to protect research and development sites Lannion and Villaceaux, while also maintaining Alcatel-Lucent‘s employment plans.   

Since Michel Combes became CEO in 2013, the struggling  Alcatel-Lucent has seen shares more than triple, while Nokia shares have doubled since the company sold its mobile phone business to Microsoft Corp. This left Nokia with €5bn at the end of 2014.

With respected portfolios including stores in the US, China, Europe and Asia-Pacific, the combined business is hoping to confirm its place as a ‘global leader‘, fully exploring its innovative technology through the ‘internet of things‘.