As part of its expansion strategy, Nokia successfully acquired Infinera, a prominent global provider of optical transmission equipment and IP transport technologies, in a $2.3 billion deal with Infinera, getting the company for about $6.65 per share.
This deal valuation culminates in a 28% premium over the stock’s closing price on June 26, 2024, and a 37% premium to the trailing 180-day VWAP.
Nokia will pay 70% of the consideration in cash, while Infinera’s shareholders can receive up to 30% of the aggregate consideration in Nokia’s American Depositary Shares.
What does the deal mean to Infinera shareholders?
The two firms agreed, with Nokia requiring Infinera’s shareholders to either take $6.65 in cash, 1.7896 Nokia American Depositary Shares (ADSs) or an aggregate of $4.66 in cash and 0.5355 Nokia ADSs.
The agreement also includes a proration mechanism that limits the Nokia ADSs issued to around 30% of the total consideration paid to Infinera shareholders.
The telecommunication firm vowed to scale up its ongoing buyback program to counteract any dilutive effects from Infinera’s acquisition. This will be in addition to Nokia’s EUR 600 million share repurchase program.
What Nokia stands to gain from this acquisition
Infinera had an astounding presence in North America, contributing nearly 60% of its cumulative sales. By acquiring Infinera, Nokia will elevate its market standings in the region and fortify its established presence in Asia-Pacific, Europe, the Middle East, Africa, and Latin America.
Overall, Nokia is looking at a roughly 75% enhancement of its optical networks business. The merger promises a staggering EUR 200 million net profit by 2027 and over 10% in comparable EPS by 2027.
Nokia’s CEO, Pekka Lundmark, expressed his enthusiasm for the deal, stating that it will help broaden the company’s reach and abilities, complementing its organic investments already made in 2021. Lundmark highlighted that the two firms’ collaboration is strategically advantageous since they are similar in their technology makeup and target market.
With global smartphone sale revenue expected to surge to over $503 billion by 2026 across all major smartphone brands, including Nokia, this deal could not have come at a better time.
Nokia’s acquisition of Infinera will increase the firm’s talent pool and augment its knowledge base on light technologies and specialized semiconductor materials. The deal will also accelerate Nokia’s product innovation timeline and elevate its worldwide reach.
Leave a Comment