Siemens (News - Alert) AG, German’s multinational engineering and electronics conglomerate is looking into whether private-equity firms are interested in buying out its telecommunications-equipment joint venture with Nokia (News - Alert) Corp. This is according to the Wall Street Journal.
The joint venture is between Siemens Communications division and Nokia's Network Business Group. The formation of the company was publicly announced on June 19, 2006. The German company's 50 percent share of Nokia Siemens Networks (News - Alert) (NSN) could be worth more than $9.36 billion, including debt.
Apparently this is something that the Gartner Group was anticipating. Gartner research director Sylvain Fabre wrote in March that Siemens would seek to finalize a deal this year. Nokia Siemens Networks has gone through a major restructuring effort. It shed a number of units and laid off thousands of employees. This was all in an effort to focus on mobile broadband. Today the company is seeing the results of that work.
According to sources that are familiar with this matter, Nokia is exploring a possible buyout of its 50/50 German partner. It seems that both parties are looking to make a split. Joe Kaeser, Siemens’ chief financial officer, 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.”
Something that may be a facilitator is a change that happened this past April in the shareholder agreement. It frees each partner to explore options for its stake without the risk of a veto from the other party. It is unclear how Nokia would view a possible sale of all or part of NSN to private-equity investors.
In an effort to buy Siemens out of the venture, Nokia has been in talks with Solidium, a Finnish sovereign wealth fund. Solidium could help pay for the deal. A sovereign wealth fund (SWF) is a state owned investment fund composed of financial assets such as stocks, bonds, property, precious metals, or other financial instruments.
While this may bring in the funds necessary for the buyout, it also poses some concerns. If the European Commission viewed Solidium involvement as a form of state aid, that conclusion could complicate or possibly derail any such deal.
If an acquisition deal is not achieved for NSN, then another possibility could an initial public offering of its shares. An analyst from Credit Suisse said that an IPO of NSN “makes the most sense” for Nokia. The analyst said that such a joint venture could be valued at around $9.99 billion.
Nokia Siemens Networks has made some major changes and beginning to gain a little ground. Siemens feels that this is a good time to go their separate ways. We will have to keep an eye out to see how this moves ahead.