Hewlett Packard Enterprise (HPE) has announced its acquisition of Juniper Networks, Inc. in an all-cash transaction for $40.00 per share, representing an equity value of approximately $14 billion. Following this news, HPE's stock moved 2.1% and is now trading at a price of $37.59 per share.
The combination of HPE and Juniper is expected to accelerate long-term revenue growth and expand gross and operating margin. HPE anticipates the acquisition to be accretive to non-GAAP EPS and free cash flow in the first year post-close. The transaction is also expected to double HPE's networking business, creating a new networking leader with a comprehensive portfolio to drive business value.
Antonio Neri, President and CEO of HPE, expressed enthusiasm about the acquisition, stating, "This transaction will strengthen HPE's position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders."
Rami Rahim, CEO of Juniper Networks, also shared his perspective, saying, "Our multi-year focus on innovative secure AI-native solutions has driven Juniper Networks' outstanding performance. We have successfully delivered exceptional user experiences and simplified operations, and by joining HPE, I believe we can accelerate the next phase of our journey."
The acquisition is expected to have compelling strategic benefits, including a pro forma financial profile with attractive top- and bottom-line growth opportunities, positioning HPE for long-term growth and greater investment capacity. It also brings complementary capabilities to deliver next-generation AI-native networking and enable new digital experiences through secure, intelligent connectivity.
Upon completion of the transaction, Rami Rahim will lead the combined HPE networking business, reporting to Antonio Neri.
The transaction is expected to close in late calendar year 2024 or early calendar year 2025, subject to regulatory approvals, approval of the transaction by Juniper shareholders, and satisfaction of other customary closing conditions.
HPE's financial advisors for the transaction are J.P. Morgan Securities LLC and Qatalyst Partners, while committed financing for the transaction has been provided by Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A., and Mizuho Bank, Ltd.
HPE and Juniper will host a conference call to discuss the announcement, providing further insights into the strategic direction of the combined entity.
The company's full 8-K submission is available here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $4,648 | $4,445 | $4,445 | $4,735 | $5,301 | $5,648 |
| Revenue Growth | n/a | -4.35% | -0.01% | 6.53% | 11.95% | 6.55% |
| Operating Margins | 12% | 10% | 8% | 8% | 10% | 10% |
| Net Margins | 12% | 8% | 6% | 5% | 9% | 6% |
| Net Income (MM) | $567 | $345 | $258 | $253 | $471 | $366 |
| Net Interest Expense (MM) | -$40 | -$12 | -$33 | -$17 | -$29 | -$14 |
| Depreciation & Amort. (MM) | $210 | $210 | $212 | $237 | $218 | $200 |
| Earnings Per Share | $1.6 | $0.99 | $0.77 | $0.76 | $1.43 | $1.11 |
| EPS Growth | n/a | -38.12% | -22.22% | -1.3% | 88.16% | -22.38% |
| Diluted Shares (MM) | 354 | 348 | 335 | 332 | 330 | 324 |
| Free Cash Flow (MM) | $714 | $419 | $512 | $590 | -$8 | $828 |
| Capital Expenditures (MM) | $147 | $110 | $100 | $100 | $105 | $156 |
| Current Ratio | 2.49 | 2.08 | 1.51 | 1.58 | 1.74 | 1.73 |
| Total Debt (MM) | $2,489 | $1,684 | $2,549 | $1,687 | $1,601 | $1,588 |
| Net Debt / EBITDA | -0.0 | 0.72 | 2.1 | 1.22 | 0.98 | 0.46 |
Juniper Networks has weak operating margins with a stable trend, declining EPS growth, and irregular cash flows. On the other hand, the company benefits from growing revenues and a flat capital expenditure trend and healthy leverage.
