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Nokia Corporation Message Board

  • inwestr inwestr Jun 14, 2013 6:46 AM Flag

    Siemens Eyes Deal for Network Venture

    Germany's Siemens AG SIE.XE -0.01% is sounding out private-equity firms about potentially buying its telecommunications-equipment joint venture with Nokia Corp., NOK1V.HE +5.32% according to people familiar with the matter.

    The German conglomerate has approached a number of buyout funds, including TPG, Blackstone Group LP BX +1.93% and KKR KKR -0.52% & Co., to gauge their interest in buying the wireless-networking venture, called Nokia Siemens Networks, the people said. Another possibility, less likely, they say, is a sale of Siemen's stake in the venture.

    Some analysts say the entire business, if it were public, could be worth more than €7 billion ($9.36 billion) including debt.

    The approaches come as Nokia explores a possible buyout of its 50/50 German partner in the venture, according to people familiar with the matter.

    It is unclear whether Siemens's approaches to private-equity firms will lead anywhere, but they add a new dimension to the partners' recent efforts to transform the six-year-old venture's ownership structure.

    The catalyst for the recent exploration of alternatives for NSN is a change this past April in the shareholder agreement that frees each partner to explore options for its stake without the risk of a veto from the other party. Still, it is unclear how Nokia would view a possible sale of all or part of NSN to private-equity investors.

    Siemens Chief Financial Officer Joe Kaeser earlier this year said NSN "is not a business that we have any aspirations to stay [in]…and I do believe that 2013 will be the time for Siemens to help NSN to move to a better place."

    As its once-formidable cellphone handset business declines, Nokia has been trying to cobble together a deal to buy Siemens out of the venture, whose fortunes have recently ticked up, analysts say. It has held discussions with Solidium, the Finnish sovereign-wealth fund, which could help it pay for such a deal, these people said.

    Before such a deal can be struck, however, significant obstacles must be overcome. For one, if the European Commission viewed Solidium involvement as a form of state aid, that conclusion could complicate or possibly derail any such deal, according to one of the people.

    NSN's valuation has improved after efforts to cut costs and focus on fourth-generation wireless networks have begun to bear fruit, bankers and analysts say. NSN has cut around a quarter of its global workforce and sold several units.

    NSN had struggled to make a steady profit after its formation in 2007 amid strong competition from Asian competitors including Huawei Technologies Co., according to analysts. More recently, it posted an operating profit of roughly €250 million in last year's fourth quarter and a small one in the first quarter of this year.

    If no acquisition deal is struck for NSN, another possibility is an initial public offering of its shares. Credit Suisse CSGN.VX +0.57% analysts said in a recent note that an IPO of NSN "makes the most sense" for Nokia, adding the joint venture could be valued at around 0.6 times its estimated revenue for 2014, or between €7.1 billion and €7.5 billion including debt in such a scenario. Estimates of the valuation of the venture in a takeover scenario are lower, with the analysts pegging that at closer to between €4 billion and €5 billion.

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