Nokia, a network equipment manufacturer, has acquired California-based Infinera, a specialist in optical network solutions and semiconductors, for approximately $2.3 billion US dollars. This acquisition will help Nokia expand its optical networks business and accelerate product development.
The purchase price of $6.65 per share represents a 28 percent premium over Infinera’s closing price on Wednesday. The transaction is expected to strengthen Nokia’s technology portfolio, vertical integration, and market position in optical networks, particularly in North America. Nokia aims to achieve synergy benefits of 200 million euros in comparable operating profit by 2027.
To finance the deal, at least 70 percent of the purchase price will be paid in cash, with the remaining 30 percent in shares. Nokia also plans to expand its share buyback program to offset any dilution caused by the acquisition. The company believes that this acquisition has strong strategic and financial rationale and will help achieve double-digit operating profit in the Optical Networks business.
As a result of the acquisition, Nokia’s newly-merged Network Infrastructure business group will include Fixed Networks, IP Networks, and Optical Networks following its recent sale of its submarine network business. Nokia aims for annual organic growth of 4–6 percent and an operating profit margin of 14–18 percent for this entity. Pekka Lundmark, CEO of Nokia, emphasizes the importance of this acquisition in enhancing the company’s competitiveness and creating significant value for shareholders.
In conclusion, this acquisition is aimed at expanding Nokia’s optical networks business and accelerating product development while achieving synergy benefits and double-digit operating profit in the Optical Networks business within the first year with a projected over ten percent increase in earnings per share by 2027.
