Nokia cancels its 51% stake sale in TD Tech, co-owned by Huawei
TD Tech, a communication solutions and equipment company, was initially announced as a joint venture between Siemens (51% stake) and Huawei (49% stake) in 2004 and started its business in 2005. In 2006, Nokia and Siemens announced a joint venture named Nokia Siemens Networks (NSN), with each holding an equal stake, and as such, TD Tech was now a subsidiary of NSN. Siemens backed out of NSN in 2013, which meant that Nokia would become the majority shareholder in TD Tech.
Fast forward to 2021, Huawei was now restricted by the US for around two years from doing any business with US companies or using US-origin technology. TD Tech emerged as one of the two candidates to whom Huawei would license its device designs to gain access to necessary components. TD Tech even started selling Huawei phones under its brand but were withdrawn rather quickly.
Given the geopolitical situation, it was not an ideal situation to be in for Nokia. At that point, Nokia stated to SuomiMobiili.fi that TD Tech operates independently and has no connection to Nokia’s operations or supply chains in China.
About a year and a half later (April 2023), Nokia announced that it is preparing to exit TD Tech, whose business now includes handsets, modems, and other devices, and that no longer fits “Nokia’s strategic focus as a B2B technology innovation leader.”
Thus, Nokia decided to divest its 51% stake in TD Tech for an estimated price of EUR 285 million (US$ 305.7 million), with an estimated gain of EUR 227 million (as of 30th June; US$ 243.58 million), to New East New Materials, a company involved in raw materials manufacturing for the flexible packaging industry. However, the finalization of the deal was subject to conditions that included a pre-emption right (refusal of sale) of the joint venture partner, which is Huawei in this case.
As soon as the deal was announced, Huawei put out a three-point statement:
- TD Tech is based on Huawei and Nokia’s strategic cooperation, technical strengths, and global sales and service capabilities.
- Agrees with Nokia’s sale of equity but does not find New East New Materials to have identical strategic capabilities for continuing the joint venture, and it has no intention to operate TD Tech with the said purchaser.
- It has the right to exercise its right of pre-emption, sell all shares to exit or terminate TD Tech’s access to licensed technology.
Reacting to Huawei’s statements, New East New Materials warned of the deal facing difficulties. On 18th August, New East New Materials, in its half-yearly report, said that the acquisition was still in progress and did not receive any communication from Nokia about whether Huawei would redeem its pre-emption right.
Yesterday, less than five months after the deal was announced, New East New Materials broke the news that it received the “Notice of Termination of the SPA” (agreement), as Nokia unilaterally terminated the stake sale in TD Tech.
The agreement included a termination fee ranging between 29 million Yuan (US$ 3.97 million) and 84.864 million Yuan (US$ 11.6 million), but its underlying conditions are not clear as of now. So, it is not known whether New East New Materials will have to pay. New East New Materials did not specify the reason for termination but did say that it would take legal measures to safeguard its legitimate rights and interests and those of its shareholders, if necessary.
From here on, it will be interesting to see Nokia’s future course of action in regards to TD Tech. Will Nokia find another purchaser that satisfies Huawei’s requirements or continue as the majority shareholder?
Update: Nokia commented on the news to Mobiili.fi stating that Nokia exercised its right under the agreement to terminate the stake sale to New East New Materials, but it still plans to pull out from TD Tech and is on the lookout for other options.
