Finland-based handset manufacturer Nokia has signed an agreement with Microsoft Corporation to sell off its mobile phone business for about $7.2 billion. The transaction is expected to be concluded in the first quarter of 2014, subject to approval by Nokia shareholders and regulatory approvals.
Under the terms of the agreement, Microsoft will acquire substantially all of Nokia?s Devices and Services business, including the mobile phones and smart devices business units as well as the company?s design team, operations including all Nokia devices and services-related production facilities, devices and services-related sales and marketing activities, and related support functions. Further, Nokia will assign to Microsoft its long-term patent licensing agreement with Qualcomm, as well as other licensing agreements.
Nokia will continue to own and manage the Nokia brand. Moreover, it will retain its patent portfolio and grant Microsoft a 10-year non-exclusive licence to its patents at the time of the conclusion of the deal. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will provide Microsoft an option to extend this mutual patent agreement in perpetuity. In addition, Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four-year licence.
The deal further states that Microsoft will immediately make available to Nokia ?1.5 billion of financing in the form of three equal tranches of convertible notes which Microsoft would fund from overseas resources. If Nokia decides to draw down on the financing option, the company would pay back these notes to Microsoft from the proceeds of the deal upon closing. However, the financing option is not conditional on the closure of the transaction.
Following the acquisition, about 32,000 Nokia employees are expected to join Microsoft, including 4,700 people in Finland and 18,300 employees directly engaged in manufacturing, assembly and packaging of products worldwide. The operations which are to be transferred to Microsoft generated revenue of an estimated ?14.9 billion, i.e. 50 per cent of Nokia?s net sales in 2012.
