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Transaction
Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail bwalko@sokoloffco.com with your contact information.

Archives > Transaction Case Study 78

SOKOLOFF & COMPANY CASE STUDY:
Nokia Acquires Alcatel-Lucent

DATE ANNOUNCED: April 16, 2015
BUYER: Nokia Corporation (NYSE: NOK)
SELLER:  Alcatel-Lucent (NYSE: ALU)
PURCHASE PRICE: Euro €15.6 Billion (approx.US $14.5 Billion at conversion rate at announcement date)
FORM OF PURCHASE PRICE: Stock

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES

Year

2012

2013

Trailing Twelve Months
through
December 31, 2014

Revenue

€14.45B

€13.81B

€13.18B

EBITDA

€888M

€892M

€1.21B

Cash

 

 

€6.01B

Debt

 

 

€5.28B

Purchase Price

 

 

€15.6B

Enterprise Value

 

 

€14.87B

Multiple of Revenue

 

 

1.13

Multiple of EBITDA

 

 

12.29

TRANSACTION DRIVERS
Alcatel-Lucent and Nokia have highly complementary portfolios and geographies, with particular strength in the United States, China, Europe and Asia-Pacific. They will also bring together fixed and mobile broadband, IP routing, core networks, cloud applications and services. This combination is expected to create access to an expanded addressable market with improved long term growth opportunities.   The transaction will further help ALU and NOK to compete against Ericsson and Huawei.  The merged company will be called Nokia Corporation.

SOKOLOFF COMMENTARY:
This acquisition represents the end of an incredible era of invention, discovery, monopoly, break-up and deterioration.  It is appropriate to pause and reflect on past greatness and salute the many fine men and women who gave us much of the technology that shapes our world today. 

Both Alcatel and Lucent have roots that began around the time that Alexander Graham Bell invented the telephone in 1876.  Lucent began in 1869 as Western Electric and was absorbed by Bell into what became AT&T in 1881.  Alcatel began in France in 1898, and in 1925 became a part of the French government owned Compagnie Générale des Câbles de Lyon (CGE).  CGE was privatized in 1987 and renamed Alcatel in 1991.

Ma Bell before the breakup in 1982 included several service and product subsidiaries.  Equipment was manufactured by Western Electric.  Groundbreaking, cutting edge research was conducted by Bell Labs.  Bell Labs is credited with the development of radio astronomy, the transistor, the laser, the charge-coupled device (CCD), information theory, the UNIX operating system, the C programming language, S programming language and the C++ programming language. Eleven Nobel Prizes were awarded for work completed at Bell Laboratories.

Bell Labs, along with Western Electric, were spun off from Ma Bell in 1982 and, after a name change, became Lucent Technologies.  Lucent merged with Alcatel and, as the subject of this Case Study, will become a subsidiary of Nokia.

Also broken out from Bell Labs was Bell Communications Research, Inc., known as Bellcore.  Bellcore was renamed Telcordia in 1999.  As part of Ma Bell, the predecessor of Telcordia was a major architect of the United States' telecommunications system, pioneering many services, including caller ID, call waiting, mobile number portability and toll-free telephone numbers (800).  Since 2012 Telcordia has been a subsidiary of Ericsson.

Change is a universal constant.  As we look at the powerhouse Googles, Apples and Facebooks of today, we can’t help but wonder what their role will be in the world they are creating a hundred years from now.  Will they go the way of Ma Bell and CGE?  Will they be replaced with the next round of technology behemoths dreamed up by those still to be born?  Whatever the case, we wish Alcatel and Lucent all the best and thank them for the many years of history spent enriching the lives of virtually everyone on this planet.

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