Nokia on Shopping Spree: Buys Infinera for $2.3 Billion, Sells Unit to France (Boosting Margins by 15%)

CONTENTS: Nokia on Shopping Spree: Buys Infinera for $2.3 Billion

Nokia is purchasing Infinera, a company known for its open optical networking solutions and optical semiconductors. This move by the Finnish mobile network provider aims to expand its optical business, particularly in the North American market.

Under the agreement, Nokia will acquire Infinera at a price of $6.65 per share, valuing the company at approximately $2.3 billion. This offer represents a 28% premium over Infinera’s closing share price on June 26, 2024, and a 37% premium over its trailing 180-day volume weighted average price (VWAP).

Nokia plans to pay at least 70% of the acquisition amount in cash. Additionally, Infinera’s shareholders have the option to receive up to 30% of the total consideration in the form of Nokia’s American Depositary Shares, as stated by both companies.

Nokia stated that it views the acquisition of Infinera as highly beneficial both financially and strategically. The company anticipates that acquiring Infinera will expedite its progress toward achieving a double-digit operating margin in its Optical Networks business. Nokia aims to realize synergies resulting in 200 million euros of net comparable operating profit by 2027.

The acquisition has received approval from both companies’ boards and is anticipated to be completed in the first half of 2025, pending regulatory and shareholder approvals.

Additionally, Nokia announced on Thursday that it has agreed to sell Alcatel Submarine Networks (ASN) to the French state for 350 million euros ($374 million). This transaction, expected to close by the end of 2024 or early 2025, is not expected to impact Nokia’s financial outlook.

Nokia on Shopping Spree: Buys Infinera for $2.3 Billion- As a result of these transactions, Nokia aims for a “mid-single digit organic growth” in its overall Network Infrastructure business and targets to enhance its operating margin to the “mid-to-high teens level,” according to a statement.

Nokia’s President and CEO, Pekka Lundmark, highlighted that the combined businesses of Nokia and Infinera exhibit strong strategic alignment, benefiting from complementary customer bases, geographic reach, and technology portfolios.

The acquisition is expected to deliver over 10% comparable earnings per share (EPS) accretion, creating substantial shareholder value.

Federico Guillén, President of Network Infrastructure at Nokia, added that the acquisition will reinforce the optical segment of Nokia’s business, broaden growth prospects across all targeted customer segments, and contribute to improving the company’s operating margin.

David Heard, CEO of Infinera, expressed that the merger will enhance their vertically integrated optical semiconductor technologies. He also emphasized that stakeholders will have the chance to benefit from the growth potential of a global leader in optical networking solutions.