Restructuring of Nokia moves forward with agreement to sell HERE to automotive industry consortium
Following its bid to restructure before buying Alcatel-Lucent, Nokia has announced today that it has reached an agreement to sell its HERE digital mapping and location services business to a consortium of major automotive companies, comprising of Audi, BMW Group and Daimler.
The transaction values HERE at an enterprise value of Euro 2.8 billion and is expected to close in the first quarter of 2016, subject to customary closing conditions and regulatory approvals.
Upon closing, Nokia estimated it will receive net proceeds of slightly above Euro 2.5 billion, as it will be paying HERE’s liabilities for the consortium that are valued at slightly below Euro 300 million. However, Nokia expects to book a gain on the sale and a related release of cumulative foreign exchange translation differences totalling approximately Euro 1 billion as a result of the transaction.
HERE is a particularly attractive proposition for the automotive market because of its recent announcement that it is developing a location cloud that harnesses the power of data generated by vehicles, devices and infrastructure to deliver real time, predictive and personalised location services.
In the automotive industry, where it serves most of the world’s leading automakers, its focus is on developing precise and accurate mapping as well as services that will enable an entirely new class of driver experiences, including highly automated driving.
HERE has been sold off as part of a strategic review carried out by Nokia in April this year, in light of its proposed acquisition of Alcatel-Lucent which makes HERE the odd business division out since the company offloaded its mobile device arm to Microsoft in 2013.
Microsoft announced early last month that things in its new Phone Hardware segment were not going well, with the news that it is now expected to underperform based on previous expectations; it will record an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business in addition to a restructuring charge of approximately $750 million to $850 million.
Upon closing of the HERE transaction, Nokia will consist of two businesses: Nokia Networks and Nokia Technologies. Nokia Networks will continue to be a provider of broadband infrastructure software and services. Nokia Technologies will continue to provide advanced technology development and licensing.
Rajeev Suri, president and CEO at Nokia, commented on the HERE deal: “With this step we complete the latest stage of Nokia’s transformation. We integrated the former Nokia Siemens Networks, divested our Devices & Services business, and have now reached agreement on a transaction for HERE that we believe is the best path forward for our shareholders, as well as the customers and employees of HERE. Going forward, we will focus on our planned combination with Alcatel-Lucent. Once that is complete, Nokia will be a renewed company, with a world-leading network technology and services business, as well as the licensing and innovation engine of Nokia Technologies.”
The company also serves the world’s leading enterprises and Internet players, including Microsoft, Samsung and SAP, and offers highly rated apps to consumers using Android, iOS and Windows Phone.
Said HERE President Sean Fernback: “I believe today’s announcement is a very good outcome for HERE, its customers and employees. The new ownership structure of HERE will allow us to accelerate our strategy, further scale our business and fulfill our intent to become the leading location cloud company across industries.”
HERE has been a separate operating and reportable segment for financial reporting purposes for Nokia with a non-IFRS operating profit of Euro 46 million on net sales of Euro 552 million for the first half of 2015, and a non-IFRS operating profit of Euro 31 million on net sales of Euro 971 million for the full year 2014.
In reported terms, HERE generated an operating profit of Euro 28 million for the first half of 2015, and an operating loss of Euro 1 241 million for the full year 2014, with the latter including a Euro 1 209 million charge for the impairment of goodwill. At the end of June 2015, HERE had 6 454 employees. Nokia plans to report HERE as a discontinued operation from the third quarter of 2015 onwards. HERE will continue to operate as a business of Nokia until the closing of the transaction.
