New Delhi: Elcoteq, a Finnish contract manufacturer of electronic goods, on Wednesday said that negotiations for sale of its controlling stake to consumers durables major Videocon have failed to fructify into a deal.

“After a mutual re-assessment, Elcoteq and Videocon have decided to terminate the negotiations aiming at Videocon becoming a major shareholder in Elcoteq,” the company said in a statement.

In September 2009, Elcoteq had informed its stock exchange that it has signed a “non-binding Letter of Intent with Videocon Industries Ltd, granting the authority to negotiate and finalize a potential Definitive Transaction Agreement.”

According to sources, Videocon was planning to take a controlling stake in Elcoteq for about $73 million and the transaction was initially expected to close by December.

Elcoteq said since the deal was announced the equity structure of the company has improved, thus requiring changes in the investment structure originally proposed by Videocon.

The company said it had issued hybrid securities of €29 million in January and had used the proceeds to repay debenture bonds having a total nominal amount of €105 million.

This major transaction improved significantly the company’s indebtedness and solidity, it said.

“By improving the equity structure of the company, the transaction altered the original investment planned by Videocon, and finally led to the mutual decision of both parties to terminate the negotiations,” Elcoteq said.

The Finnish firm would, however, continue to look for alternative ways for “strengthening its financing structure through equity and long-term financing arrangements,” it added.

The company has a plant in Chennai, with estimated revenues of Rs2,000 crore and employs around 3,000 people. The company, which has global revenues of around €3.4 billion last year, has been hit hard by the global economic meltdown and has huge debts.

Elcoteq makes mobile phones for the likes of Nokia, Sony Ericsson. It also makes set-top boxes, flat panel TVs and enterprise network products for firms like Philips and Cisco.