Nokia to pay €1.7bn to buy Siemens out of telecoms joint venture By Richard Milne, Nordic Correspondent Nokia is buying Siemens out of their telecoms equipment joint venture for €1.7bn, giving the Finnish group full control over what is currently its best-performing business but raising questions about the strength of its balance sheet. The full purchase of Nokia Siemens Networks adds the relative stability of the telecoms equipment business to the Finnish group’s struggling mobile phone unit, which has been subject to rumours about a possible sale. The deal represents a remarkable turnround for NSN after Nokia and Siemens failed to sell the joint venture to private equity firms two years ago. For Nokia, NSN allows it to consolidate what is currently its most profitable asset while it allows Siemens to exit a joint venture that had become one of the biggest bugbears for investors in the German conglomerate. Nokia said it would pay Siemens €1.2bn in cash at the closing of the transaction, expected in the current quarter. The remaining €500m would be paid through a secured loan from Siemens due one year after closing. Pierre Ferragu, an analyst at Bernstein Research, said the deal was both good and bad from Nokia’s perspective as the company “buys itself a future whatever happens” to its struggling mobile phones division. But he added: “This is a negative because we recently showed Nokia’s balance sheet isn’t as strong as it appears at first sight [and] from that perspective the acquisition of Nokia Siemens in full is a further stretch.” Nokia said its net cash position had fallen from €4.5bn at the end of the first quarter to a current estimate of €3.7bn-€4.2bn by the end of June. Were the deal to have closed in the second quarter, net cash would have been €2bn-€2.5bn, Nokia added. NSN will keep its management team and its headquarters in Finland including a strong presence in Germany, but the Siemens name will be dropped from the company title. Stephen Elop, Nokia’s chief executive, hailed NSN’s recent turnround in which it returned to profitability after a deep restructuring and has carved out a strong position in 4G LTE networks. “Nokia is pleased with these developments and looks forward to continue supporting these efforts to create more shareholder value for the Nokia group,” he added. NSN made an underlying profit of €196m in the first quarter of 2013 against break-even performances at its mobile phones and mapping businesses. Joe Kaeser, Siemens’ finance director, said: “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 Munich-based company is seeking to cut costs and sell non-core parts of its portfolio to help close a profitability gap with its engineering rivals. Mark Fielding at Citi Research said NSN had been “a significant drag on the [Siemens] group” and the sale had therefore “solved a persistent problem area”. Citi calculated that NSN had caused €3.85bn in cumulative losses for Siemens in the last five years, including a €1.6bn impairment charge in 2009.
Posted on: Mon, 01 Jul 2013 07:30:11 +0000
Trending Topics
Recently Viewed Topics
© 2015