Nokia has announced that it has agreed to sell its HERE mapping business to a consortium of automobile makers for €2.8 billion ($3.07 billion) ending a speculation of what the future really holds for Nokia.
The consortium comprises of leading automotive companies, including AUDI AG, BMW Group and Daimler AG (the “Consortium”). The move by Nokia comes over a year after Nokia completed the sale of its devices business to Microsoft last year. In April of this year, Nokia confirmed it was “reviewing” options for HERE, one outcome of which was a sale. It isn’t initially clear whether any, or indeed how many, of HERE’s 6,454 staff will be let go following the closure of the deal.
The transaction values HERE at an enterprise value of EUR 2.8 billion with a normalized level of working capital and is expected to close in the first quarter of 2016, subject to customary closing conditions and regulatory approvals.
Upon closing, Nokia estimates that it will receive net proceeds of slightly above EUR 2.5 billion, as the purchaser would be compensated for certain defined liabilities of HERE currently expected to be slightly below EUR 300 million as part of the transaction. Nokia expects to book a gain on the sale and a related release of cumulative foreign exchange translation differences totaling approximately EUR 1 billion as a result of the transaction.
In April 2015, Nokia announced a review of strategic options for HERE in light of its proposed combination with Alcatel-Lucent. The announcement of this sale to the Consortium concludes that strategic review process.
Rajeev Suri, President and CEO of Nokia, said: “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.”
HERE is developing a location cloud that harnesses the power of data generated by vehicles, devices and infrastructure to deliver real-time, predictive and personalized 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. 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.
“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,” said HERE President Sean Fernback.
HERE has been a separate operating and reportable segment for financial reporting purposes for Nokia with a non-IFRS operating profit of EUR 46 million on net sales of EUR 552 million for the first half of 2015, and a non-IFRS operating profit of EUR 31 million on net sales of EUR 971 million for the full year 2014.
In reported terms, HERE generated an operating profit of EUR 28 million for the first half of 2015, and an operating loss of EUR 1 241 million for the full year 2014, with the latter including a EUR 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.
Upon closing of the HERE transaction, Nokia will consist of two businesses: Nokia Networks and Nokia Technologies. Nokia Networks will continue to be a leading provider of broadband infrastructure software and services.
Nokia Technologies will continue to provide advanced technology development and licensing. Nokia’s proposed combination with Alcatel-Lucent is expected to close in the first half of 2016, subject to customary closing conditions and regulatory approvals, and will create an innovation leader in next generation technology and services for an IP connected world.
Nokia suspended its capital structure optimization program in conjunction with the announcement of the proposed combination with Alcatel-Lucent. As previously stated, Nokia intends to evaluate the resumption of a capital structure optimization program after the closing of the proposed Alcatel-Lucent transaction.
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