Ericsson, Nokia Investors Buy Into Hopes of US Buyout
February 07 2020 - 6:50AM
Dow Jones News
By Dominic Chopping
STOCKHOLM--Shares in Telefon AB L.M. Ericsson (ERIC-A.SK) and
Nokia Corp. (NOKIA.HE) rose Friday after the Trump administration
floated the idea that the U.S. could buy a stake in either of the
telecom-equipment manufacturers--a sign that investors at least are
taking the gambit seriously.
U.S. Attorney General William Barr told an audience in
Washington on Thursday the U.S. and its allies should consider
taking a controlling financial interest in the two Nordic
companies, as a way of countering the dominance of China's Huawei
Technologies Co.
The suggestion from Mr. Barr, a former general counsel at
cellphone carrier Verizon Communications Inc. (VZ)--a big customer
of Ericsson and Nokia--left many industry watchers wondering how
serious the administration was about the idea.
Representatives for Ericsson and Nokia didn't comment, and
neither did spokespeople for the governments of Sweden and Finland,
where the two companies are based and are national champions. Some
investors, though, appeared to embrace the idea, with shares in
both companies rising more than 4%.
Cevian Capital, one of Ericsson's largest shareholders, said a
deal would make perfect sense for the U.S. if it wanted to be a
leader in 5G technology. Cevian has an 8.4% stake in Ericsson.
However, any deal would have to involve a hefty premium to
Ericsson's share price, said Christer Gardell, Cevian's managing
partner.
"The current share price greatly undervalues the company's
long-term fundamentals," he said.
The shares prices of both Ericsson and Nokia have fallen over
the past year as the companies battle for control of the burgeoning
market for 5G equipment with Huawei.
Mr. Gardell suggested a U.S. investment in Ericsson could pose
fewer hurdles than a deal with Nokia because the Swedish company
doesn't have state ownership. Finland holds a 3.8% stake in Nokia
through its Solidium holding company, which holds stakes in
nationally important listed companies. Solidium declined to
comment.
"It is clearly better for Sweden, the company, the employees and
the shareholders that an American deal is done with Ericsson and
not with Nokia," Mr. Gardell said. "The board and management need
to drive and handle this question with the highest priority."
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
February 07, 2020 06:35 ET (11:35 GMT)
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