Nokia has taken a big step today as the Finnish firm has reported that it has bought out its German partner Siemens, which means that the Nokia Siemens Networks are now fully owned by Nokia rather than being split between the two.
Nokia purchased the shares of Siemens for a cool €1.7 billion (£1.45 billion) in a move that will eventually see the Siemens name dropped from the network, with the Siemens aspect of the business bought into the Nokia area to become one brand.
The Finnish firm will be paying the €1.2 billion in cash when the deal is completed in the third quarter, with the balance of €500 million to be paid in the form of a secured loan from Siemens due a year later. This will see an end to the NSN (Nokia Siemens Networks) as it becomes a wholly owned subsidiary of Nokia.
Originally the NSN partnership was established in 2007 with Nokia and Siemens combining their network businesses but since then Siemens has seen a massive decline in its mobile based business and until recently Nokia were also suffering in the new world of smartphones.
However, after a few years of financial struggle after its launch, the restrictions on the original shareholder pact for NSN expired in April which has since freed each partner to explore other options for its stake without the risk of a veto from the other party.
This has led to Nokia buying out the Siemens aspect of the business as it was as “an attractive opportunity to actively shape the telecom equipment market for the future and create sustainable value”, which is how Siemens CEO Joe Kaeser put it.
What will Siemens bring to Nokia’s rising stock? We don’t know yet but it will be interesting to see what Nokia can get out of their €1.7 billion purchase.
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Nokia to fully acquire Siemens’ stake in Nokia Siemens Networks
Nokia Corporation
Stock Exchange Release
July 1, 2013 at 07.00 (CET +1)
Espoo, Finland and Munich, Germany – Nokia Corporation and Siemens AG today announced that they have entered into a definitive agreement pursuant to which Nokia acquires Siemens’ entire 50% stake in their joint venture, Nokia Siemens Networks. The acquisition has been approved by the Board of Directors of Nokia as well as the Managing and Supervisory Boards of Siemens, and is subject to the customary regulatory approval process.
The purchase price for Siemens’ stake is EUR 1.7 billion and the transaction is expected to close during the third calendar quarter of 2013. Upon closing of the planned acquisition, Nokia Siemens Networks will become a wholly owned subsidiary of Nokia.
Stephen Elop, President and CEO of Nokia, commented: “With its clear strategic focus and strong leadership team, Nokia Siemens Networks has structurally improved its operational and financial performance. Furthermore, Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity. Nokia is pleased with these developments and looks forward to continue supporting these efforts to create more shareholder value for the Nokia group.”
Joe Kaeser, Siemens CFO, commented: “With this transaction, we continue our efforts to strengthen our focus on Siemens’ Core areas of Energy management, Industry and Infrastructure as well as Healthcare. The full acquisition of Nokia Siemens Networks by Nokia offers an attractive opportunity to actively shape the telecom equipment market for the future and create sustainable value.”
Nokia Siemens Networks was established on April 1, 2007, as a joint venture combining Nokia’s Networks Business Group and Siemens’ carrier-related operations for fixed and mobile networks. Nokia Siemens Networks has since become a leading global provider of telecommunications infrastructure, deploying networks that help people stay connected in more than 150 countries around the world. The company’s focus is in offering innovative mobile broadband technology and services.
Nokia will continue to consolidate Nokia Siemens Networks for financial reporting purposes as well as continue to strengthen the company as a more independent entity.
Accordingly, Nokia plans to retain the existing management and governance structure at Nokia Siemens Networks, with Rajeev Suri continuing as CEO and Jesper Ovesen continuing as Executive Chairman of the Nokia Siemens Networks Board of Directors, which will adjust to the changing ownership structure.
Nokia Siemens Networks’ operational headquarters will remain in Espoo, Finland, and the company will continue to have a strong regional presence in Germany, including its major hub in Munich. Nokia supports the current management plan, including the already in-progress Nokia Siemens Networks restructuring plan that remains unchanged as a result of this announcement.
In accordance with this transaction, the Siemens name will be phased out from Nokia Siemens Networks’ company name and branding. Nokia and Nokia Siemens Networks plan to confirm the new name and brand at the closing of the transaction.
The purchase price totals EUR 1.7 billion, of which EUR 1.2 billion will be paid in cash at the closing of the transaction. The balance of EUR 0.5 billion will be paid in the form of a secured loan from Siemens due one year from closing. Nokia has obtained committed bank financing for the EUR 1.2 billion cash portion.
At the end of the first quarter 2013, Nokia had gross cash of EUR 10.1 billion and net cash of EUR 4.5 billion. Nokia currently estimates that at the end of the second quarter 2013, Nokia had gross cash of between EUR 9.2 billion – EUR 9.7 billion and net cash of between EUR 3.7 billion – EUR 4.2 billion. For comparison purposes, if the transaction to purchase Siemens’ 50% stake had been closed during the second quarter 2013, Nokia currently estimates that it would have ended the second quarter of 2013 with gross cash of between EUR 9.2 billion – EUR 9.7 billion and net cash of between EUR 2.0 billion – EUR 2.5 billion, reflecting the deduction of the purchase price of EUR 1.7 billion from Nokia net cash.
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