According to the official press release, the two companies will combine to create an innovation leader in next generation technology and services for an IP connected world.
The acquisition will be carried out as a share exchange, creating a telecom equipment giant with sales over $27 billion.
The two companies have signed a memorandum of understanding under which Nokia will give Alcatel-Lucent shareholders 0.55 shares in the combined company for each of their old shares.
The new merged company will be known as Nokia Corporation and is expected to be a real world-class player in next generation technology.
“Together, Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services, with the scope to create seamless connectivity for people and things wherever they are. Our innovation capability will be extraordinary, bringing together the R&D engine of Nokia with that of Alcatel-Lucent and its iconic Bell Labs. We will continue to combine this strength with the highly efficient, lean operations needed to compete on a global scale,” said Rajeev Suri, President and Chief Executive Officer of Nokia.
“Together, we expect to have the scale to lead in every area in which we choose to compete, drive profitable growth, meet the needs of global customers, develop new technologies, build on our successful intellectual property licensing, and create value for our shareholders. For all these reasons, I firmly believe that this is the right deal, with the right logic, at the right time.”
The deal will be finalised in the first half of 2016 and is expected to result in 900 million euros of operating cost savings by the end of 2019.
“This transaction comes at the right time to strengthen the European technology industry. We believe our customers will benefit from our improved innovation capability and incomparable R&D engine under the Bell Labs brand. The global scale and footprint of the new company will reinforce its presence in the United States and China,” added Michel Combes, Chief Executive Officer of Alcatel-Lucent.
“The proposed transaction represents a compelling offer for our shareholders both in terms of upfront premium and long term value creation potential. Shareholders of Alcatel-Lucent now have the opportunity to participate in the future upside of the industrial project that they have supported during the last two years, through a stronger combined business with greater global scale and a better position for the longer term. The new company will also provide our employees exciting opportunities to be part of a global leader.”
Since selling its handset unit to Microsoft last year, Nokia has refocused on its telecommunications and broadband offerings.