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Nokia $16.6 Billion Bid Opposed by Major Alcatel-Lucent Shareholder

Odey Asset Management calls the offer "unacceptable," while Nokia's CEO defends the deal and says it is getting positive investor feedback.

shareholder opposition

Nokia's planned $16.6 billion acquisition of rival Alcatel-Lucent is getting pushback from a major Alcatel-Lucent shareholder that is complaining the price is too low.

Investment firm Odey Asset Management, Alcatel-Lucent's second-largest shareholder, reportedly told clients in a letter that Nokia's offer significantly undervalues the France-based networking vendor.

"The deal has been dressed up as a takeover of Alcatel by Nokia," Odey officials told investors in the letter, according to a report in The Financial Times. "In reality the premium they are offering has the hallmarks of a merger. We therefore find the terms of the deal unacceptable."

After almost two years of rumors, the two companies announced earlier this month that Nokia will buy Alcatel-Lucent. The combination of the two companies will create a networking technology company that can challenge such giants as Ericsson, Cisco Systems and Huawei Technologies. Together, Nokia and Alcatel-Lucent generated $27.5 billion in revenue last year and $2.45 billion in profit, and have more than $5 billion in R&D.

Odey officials in their letter said they recognize the "strategic logic" of the deal, which will "create a stronger company." However, the investment firm said in a regulatory filing that they would not tender their shares in Alcatel-Lucent for the deal. The Financial Times noted that to complete the deal, only Nokia shareholders need to approve it and that only half of Alcatel-Lucent shares need to be tendered.

Following the announcement of first-quarter financial numbers April 30, Nokia CEO Rajeev Suri said in a conference call that he was comfortable with the terms of the deal and that company officials have "met many investors in the last couple weeks, and there's very strong, good feedback," according to a Reuters report.

However, those financial numbers caused concern after Nokia officials said the company's telecommunications networking business saw profits drop 61 percent over the same time last year, caused by price cuts and slow software sales. The news caused Nokia's share price to fall by as much as 10 percent and fueled worries that if Nokia's shares continue to struggle and Alcatel-Lucent posts strong first-quarter numbers, the terms of Nokia's bid may need to be revised.

The deal, which has been approved by the boards of directors of both companies, is expected to close in the first half of 2016.