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Ericsson to acquire key assets of Marconi's telecommunications business
Ericsson has announced that it has reached an agreement with Marconi Corporation plc to acquire the parts of Marconi's telecommunications business that are strategically important to Ericsson.
* The agreement strengthens Ericsson's position in the accelerating transmission segment
* Expands Ericsson's platform for leadership in next generation converging networks
* Adds sales of approximately SEK 14.0 b. (GBP 1.0 b.), acquisition price SEK 16.8 b. (GBP 1.2 b.)
* Will contribute positively to EPS from 2007, neutral effect in 2006
* Headquarters and certain businesses in UK and Germany are not part of the acquisition
* Marconi's UK pension plan is not part of the acquisition
Carl-Henric Svanberg, President and CEO of Ericsson, said: "The acquisition of the Marconi businesses has a compelling strategic logic and is a robust financial case. As fixed and mobile services converge, our customers will substantially benefit from this powerful combination."
According to Ericsson, Marconi's competitive transmission offerings, especially in optical systems, will combine with Ericsson's strong microwave radio position and worldwide sales organization to create a solid foundation for growth.
Ericsson's fixed network business combined with Marconi's broadband access offering and Marconi's long-standing relationships with leading fixed operators will reinforce Ericsson's market position.
Strategic assets
Ericsson will acquire assets representing about 75 percent of Marconi's turnover:
* Marconi's optical networking business
* Marconi's broadband and fixed radio access network business
* Marconi's softswitch business
* Marconi's data networking equipment and services businesses
* Marconi's relevant telecommunications services activities
* The Marconi trademark, associated brand names and IPR
Ericsson will pay approximately SEK 16.8 b. (GBP 1.2 b.) to Marconi in cash on completion, subject to certain closing adjustments. The acquisition will add roughly SEK 14.0 b. (GBP 1.0 b.) in sales and is expected to have a neutral effect on Ericsson's EPS in 2006 with positive contribution from 2007. Ericsson believes that operating margins in line with Ericsson's corporate average can be achieved in the acquired businesses over time.
The businesses to be acquired had net tangible assets of approximately SEK 1.4 b. (GBP 0.1 b.) at September 30, 2005. The acquisition cost for Ericsson will be allocated mainly to intellectual property rights (brands, trade marks, patents etc.), which are expected to be tax deductible for Ericsson.
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