July 1, 2013
Nokia Buys Out Siemens’ NSN Stake For $2.2B
Michael Harper for redOrbit.com - Your Universe Online
Finnish phone maker Nokia announced plans today to buy out Siemens' share of Nokia Siemens Networks (NSN), a joint venture the two companies started in 2007. Nokia will pay a less-than-expected 1.7 billion euros ($2.2 billion) to take control of NSN, a company which builds 4G and telecom equipment used to power smartphones and feature phones.
Nokia's own cell phones have been struggling to compete with market leaders, Apple and Samsung. Additionally, their partnership with Windows Phone has yet to return the Finnish company to their former position of top cell phone maker. Nokia's takeover will become official in the third quarter, though it's yet unclear what Nokia could do with the company once it's wholly in their hands.
"As the deal is closed, we will continue to strengthen NSN as a more independent entity," said Nokia's chief executive Stephen Elop in a statement. "As for the future for Nokia Siemens, we have consistently said that there are a range of options available."
Of the 1.7-billion euro deal almost all will be traded in cash. According to Reuters, Nokia will pay 1.2 billion euros in cash while the remaining half billion will be traded via a secured loan from Siemens. Though many expected Nokia to pick up the remaining 50 percent stake in NSN for more than 1.7 billion euros, Elop said the time and price were right for this take over.
"Economically, the transaction somewhat stands on its own," he said. "We felt that the purchase was very attractive for Nokia's shareholders, its customers and its employees."
Nokia's net cash position at the moment is between 3.7 billion and 4.2 billion euros, meaning they had the cash on hand to buy out the remaining shares now. Had they waited until the second quarter, however, the Finnish phone maker would have only had between 2 and 2.5 billion euros on hand. The deal is still subject to standard regulatory approval and should be completed by the third quarter.
Analysts and investors feel good about this takeover as Nokia and Siemens shares both climbed by 7 and 1.8 percent respectively.
In a letter to his clients, Bernstein analyst Pierre Ferragu said the deal could ensure Nokia stays in a position of power in the telecom market going forward.
"With this transaction, Nokia buys itself a future, whatever happens in smartphones and feature phones," said Ferragu, according to Bloomberg Businessweek.
"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."
Joe Kaeser, the chief financial officer of Siemens is also pleased with the takeover, saying in a statement: "With this transaction, we continue our efforts to strengthen our focus on Siemens' core areas of energy management, industry and infrastructure."
Siemens has sought before to get out of NSN by selling their portion to equity firms as they shift their focus away from other ventures to their profitable businesses in health care and transportation technologies.
Nokia now has full control of a company which owns about 20 percent of all LTE networks in the nation.