Finnish mobile handset maker Nokia today said that it will buy Siemens stake in their struggling telecom gear joint venture, Nokia Siemens Networks (NSN), for €1.7 billion ($2.21 billion).
Under the deal, Nokia will pay €1.2 billion in cash for Siemens' 50 per cent stake in NSN, and the remaining via a secured loan due with Siemens one year after the deal is closed.
The deal is expected to close during the third quarter of 2013 and upon closing, NSN will become a wholly owned subsidiary of Nokia.
Officially launched at the 3GSM World Congress in Barcelona in February 2007 to compete against Ericsson and Chinese rival Huawei Technologies, NSN has been struggling to generate profit after posting losses for two years, though it has now posted profits in the past few quarters.
NSN, the world's second-largest maker of telecommunications equipment with a 13.2-per cent market share, had in 2011 undertaken a massive global restructuring and said that it would cut 17,000 jobs by 2013 in order to save €1 billion in costs.
Since then the company, headed by Rajeev Suri, has sold non-core assets, including its optical fibre unit to Marlin Equity Partners and its fixed-line broadband access business to Adtran.
Both Siemens and Nokia have been looking to exit the joint venture through a buyout or public offering and several media last month reported that Siemens was seeking offers from private equity firms to buy its stake in NSN after the restructuring resulted in the company a profit of €899 million ($1.2 billion) during Q1 2013.
Nokia plans to retain the existing management of NSN, with Suri continuing as CEO and Jesper Ovesen continuing as executive chairman. It also plans to retain the operational headquarters in Espoo, Finland, and continue to have a strong regional presence in Germany, including its major hub in Munich.
Stephen Elop, president and CEO of Nokia, said, "With its clear strategic focus and strong leadership team, NSN has structurally improved its operational and financial performance. Furthermore, Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity."
"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 full acquisition of NSN by Nokia offers an attractive opportunity to actively shape the telecom equipment market for the future and create sustainable value," said, Joe Kaeser, CFO of Siemens.