SHARES in Alcatel-Lucent leapt almost 15 per cent yesterday after Nokia confirmed it was in talks to merge with its French rival.
The Finnish telecommunications firm and its smaller French counterpart have struggled to adapt to the age of the smartphone, leading Nokia to sell off its handset business to Microsoft last year. Both firms are hoping their combined clout will allow them to reverse their long term decline with Nokia especially looking to benefit from increased access to US markets. In addition, both companies will be looking to make efficiency savings based on the similarities of their respective business models.
However, in a joint statement the companies were keen not to get ahead of themselves, admitting that while they were in “advanced discussions” there was no certainty of any transaction.
One major obstacle to any deal could be the French government, which views telecommunications as a critical sector to the French economy. The French government will also be looking to ensure the merger does not translate into job losses, with Alcatel employing 6,000 people in France.
If the merger was to go ahead it would result in a €40bn (£29bn) titan with over 100,000 employees. The new firm would have combined sales of €26bn compared to €24bn for Ericsson and €37bn at Huawei.
BEHIND THE DEAL
THE ZAOUI BROTHERS: ZAOUI & CO
1 Morocco-born Michael and Yoel Zaoui set up Zaoui & Co in 2013 and use their combined 50 years of Wall Street banking and fluency in foreign languages to conduct business across Europe, the US, North Africa and the Middle East.
2 Michael Zaoui was educated in France, the UK and the US. He began his career at Morgan Stanley in 1986 in New York before moving to London in 1990 where he helped the company top the European league tables for M&As. He is a govenor of the Hayward Gallery.
3 Yoel Zaoui began his career at Goldman Sachs in 1988 in the M&A department in New York. He moved to London in 1989 before becoming a partner in the firm in 1998. He was educated France and the US and obtained a diploma from the Ecole des Hautes Etudes Commerciales.
Unusually in a deal of this magnitude JP Morgan is the sole advisor to Nokia.