ESPOO, Finland - Nokia (HE:NOKIA) Corporation (NYSE: NOK) has reached a definitive agreement to acquire Infinera (NASDAQ: NASDAQ:INFN), a renowned provider of optical networking solutions, for an enterprise value of $2.3 billion. The transaction, which values Infinera at $6.65 per share, represents a 28% premium over its closing price on June 26, 2024, and a 37% premium to its 180-day volume weighted average price.
This strategic move is set to enhance Nokia's scale in the optical networks sector by 75%, particularly strengthening its position in North America, and is expected to accelerate the company's product development and customer diversification efforts.
Nokia's technology leadership in optical networks is anticipated to benefit from the acquisition, with a focus on expanding its webscale customer base, the fastest-growing segment of the market.
Nokia has outlined that the transaction is projected to be accretive to its comparable operating profit and earnings per share (EPS) in the first year following the close. By 2027, the company expects to achieve over 10% comparable EPS accretion and targeted net comparable operating profit synergies of EUR 200 million.
The deal will be financed with Nokia's cash on hand, and at least 70% of the consideration will be paid in cash, with the option for Infinera shareholders to receive up to 30% in Nokia American Depositary Shares (ADSs).
Pekka Lundmark, President and CEO of Nokia, commented on the acquisition, stating that the company's increased organic investment in Optical Networks has delivered improved customer recognition and profitability. He believes that now is the opportune time to expand Nokia's scale in optical networks through this acquisition.
The combined businesses are expected to yield substantial strategic benefits, including an accelerated product roadmap, increased global scale, and enhanced in-house technology capabilities. The deal is also anticipated to bolster Nokia's expansion into enterprise and webscale markets, leveraging Infinera's established presence with internet content providers.
The transaction has received unanimous approval from both companies' boards of directors and is expected to close in the first half of 2025, subject to Infinera shareholder approval, regulatory clearances, and other customary closing conditions. Oaktree Optical Holdings, L.P., which owns approximately 11% of Infinera common stock, has agreed to vote in favor of the transaction.
This acquisition marks a significant step in Nokia's strategy to achieve mid-single digit organic growth for its overall Network Infrastructure business and improve its operating margin to mid-to-high teens levels. The information shared in this article is based on a press release statement from Nokia Corporation.
In other recent news, Nokia is reportedly considering an acquisition of Infinera Corp , a company that specializes in optical telecommunications equipment. This move is seen as part of Nokia's strategic expansion in the optical telecom sector.
Meanwhile, Infinera has received a noncompliance notice from Nasdaq due to its failure to file a required quarterly financial report on time. The company is now required to submit a plan detailing how it will regain compliance with Nasdaq's requirements by September 2024.
In terms of financial performance, Infinera reported a revenue shortfall for the first quarter and expects a year-over-year revenue decline of 1% to 5% compared to 2023. However, the company remains optimistic about its long-term growth prospects, aiming to return to its target growth rate of 8% to 12% in 2025. Despite these challenges, Infinera has secured several strategic deals and design wins, potentially worth over $1 billion, which are expected to drive future growth.
InvestingPro Insights
As Nokia Corporation sets its sights on acquiring Infinera, a look at the InvestingPro data and insights provides a deeper understanding of the latter’s financial health and market position.
Infinera, with a market capitalization of $1.23 billion, is trading at a high Price / Book multiple of 7.63 as of the last twelve months leading up to Q1 2024, indicating a significant premium over its book value. This aligns with the premium that Nokia is willing to pay per share, suggesting confidence in Infinera's intrinsic value and future growth prospects.
In terms of profitability, Infinera has not been profitable over the last twelve months, with a P/E Ratio of -15.26, further adjusted to -16.89 for the same period. However, analysts predict the company will turn profitable this year, which may have been a contributing factor to Nokia’s acquisition decision, as it could signal potential for future earnings growth that Nokia can capitalize on.
InvestingPro Tips highlight that Infinera’s stock price movements have been quite volatile, with a 1-week price total return of 1.77% but a 1-month price total return of -5.13%, reflecting the market's sensitivity to news and changes within the optical networking sector. Moreover, Infinera does not pay a dividend to shareholders, which could be an attractive aspect for Nokia, as it may indicate a reinvestment of profits back into the company's growth initiatives.
For readers looking to delve deeper into Infinera's financials and market performance, InvestingPro offers more detailed analysis and additional tips. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to the full suite of insights that can guide investment decisions. There are 7 additional InvestingPro Tips available for Infinera, which can be found at https://www.investing.com/pro/INFN.
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