Nokia Corporation has made a significant move in the optical networking space, as it announced its acquisition of Infinera for a total enterprise value of $2.3 billion. This transaction represents a premium of 28% to Infinera’s share price at the close of June 26, 2024, and a 37% premium to the trailing 180-day volume weighted average price.
The acquisition is expected to create a highly scaled and truly global optical business for Nokia, with targeted net comparable operating profit synergies of EUR 200 million by 2027. Additionally, the transaction is anticipated to be accretive to Nokia’s comparable operating profit and EPS in year 1 and deliver over 10% comparable EPS accretion in 2027.
Nokia aims to increase its share buyback to offset dilution, with the deal being financed from Nokia’s cash on hand. The company sees a significant opportunity in merging with Infinera to improve scale and profitability, accelerate the development of new products and solutions, and benefit customers.
The combination of Nokia and Infinera is projected to accelerate Nokia’s journey to a double-digit operating margin in its optical networks business. The transaction will also create a reshaped network infrastructure built on three strong pillars of fixed networks, IP networks, and optical networks.
This acquisition is also expected to strengthen Nokia’s technology leadership in optical and increase exposure to webscale customers, with the potential to deliver mid-single digit organic growth for the overall network infrastructure business and improve its operating margin to mid-to-high teens level.
In terms of financial projections, the transaction is expected to be accretive to Nokia’s comparable EPS in the first year post-close and to deliver over 10% comparable EPS accretion by 2027, with a return on invested capital comfortably above Nokia’s weighted average cost of capital.
The acquisition has been unanimously approved by the board of directors of both Nokia and Infinera and is targeted to close during the first half of 2025, subject to approval by Infinera’s shareholders and regulatory approvals.
This move is expected to have compelling strategic benefits for Nokia, Infinera, and their customers, including improving global scale and product roadmap, gaining scale in the North American optical market, building on Nokia’s commitment to investment in US-based manufacturing, and accelerating Nokia’s expansion into enterprise and webscale.
The transaction's advisors include PJT Partners as the financial advisor to Nokia and Skadden, Arps, Slate, Meagher & Flom LLP and Roschier, Attorneys Ltd as legal advisors.
The market has reacted to these announcements by moving the company's shares 17.0% to a price of $6.16. For more information, read the company's full 8-K submission here.
