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Nokia’s Factory in Korea Excluded from M&A Deal
Microsoft-Nokia Merger
Nokia’s Factory in Korea Excluded from M&A Deal
  • By matthew
  • April 23, 2014, 02:44
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Factory of Nokia TMC, a production facility located in Changwon City, Korea.
Factory of Nokia TMC, a production facility located in Changwon City, Korea.

 

Nokia said on April 21 (local time) that it will conclude the sale of its handset unit to Microsoft on April 25. As a result, the €5.4 billion (8 trillion won, US$7.45 billion) deal, which was announced last September, is going to be finalized after seven months. At first, the two companies intended to close the deal by the first quarter. However, they were forced to delay their plan, since it took a much longer time for regulatory authorities in Asia such as China and Korea to conduct their reviews. Nokia’s tax case in India is another factor in the delay.  

What is noticeable is that a Nokia manufacturing facility in Masan, Korea will be excluded from the deal, even though it was initially planned. Microsoft confirmed that it would not buy Nokia’s Korean factory, although it was part of the original terms of the deal, the Financial Times (FT) said. Nokia reportedly said, “Microsoft requested a change in the transaction due to excess capacity, and we have signed a joint agreement on this adjustment. As a result, our Korean employees and assets will not transfer to Microsoft. We are now evaluating our options.”

Nokia TMC, a production facility in Korea operated by the Finnish company, recorded 365.5 billion won (US$352.0 million) in sales last year, which is just one fifth of the 1.6289 trillion won (US$1.5686 billion) from the previous year. The drastic decrease in sales is attributable to the worsening sales performance of Nokia’s mobile phone business. Even though Nokia prepared for an M&A transaction by reducing its workforce from 900 to 200 people last year, the software giant apparently refused to acquire Nokia’s facility in Korea. Due to Microsoft’s refusal, the factory is likely to be shut down.