Amid break-up talk, NSN's private equity bidders back off
Two US firms go cold on joint bid for stake in Nokia Siemens, as speculation rises that the venture could be sold or IPO'd earlier than
Published: 12 June, 2011
READ MORE: M&A
Amid mounting speculation that Nokia might break up, its 50% stake in Nokia Siemens would be the simplest unit to separate. Some analysts believe the two partners in the infrastructure company will take the opportunity of Nokia's current troubles and reorganization to sell the company. But a more modest plan to get a private equity partner for a minority stake seems to be on hold, with two of the interested groups reported to have walked away.
According to The Financial Times, the KKR and TPG private equity groups have backed out of bidding after "months" of studying NSN's books. However, another partnership, between the Gores Group and Platinum Equity, is still in the running. Siemens told the FT that NSN remained "in constructive talks with several interested parties".
According to the report, the change of heart at the two US firms was partly down to fears that Nokia had "not concentrated on the operational problems of NSN" because of the even bigger challenges in its handset business. Siemens is said to be frustrated with this situation and some managers told the FT that Nokia was running the venture as a "simple division" rather than a large and complex organization. Nokia owns a golden share in the venture and is represented on the board by four of the seven members.
The tense relations between the two parents, Nokia's own crises elsewhere, and the possible breakdown of any private equity deal, all point to a situation where Nokia and Siemens might look to exit the initiative entirely, at an earlier stage than expected. When the PE talks started last summer, they were expected to wait until their JV agreement ends in 2013, and then to seek an IPO, but this attempt - or a search for an outright buyer - could now happen more promptly. However, the most likely acquirers would all face obstacles - antitrust or security fears would surround Ericsson, Huawei or possibly ZTE, while Alcatel-Lucent has only just recovered from its own painful merger. Samsung, which has been linked to Nokia's handset business, might be more interested in taking on NSN, as it is trying to build up its infrastructure business, with particular focus on the NSN stronghold of Europe.
In the first quarter, NSN narrowed its operating loss to $203m, down from $322.5m in the year-ago quarter. Sales were up to $4.6bn, from $3.94bn a year earlier. NSN closed its $975m acquisition of Motorola Solutions' wireless networking business at the end of April.
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