Nokia, the Finnish telecom gain has recently announced its plans to acquire the optical transmission equipment provider Infinera of San Jose, estimated for a total of 2.3 billion USD. Nokia set the acquisiton price to be $6.65 per equity share on June 26, representing a 28 per cent premium over Infinera’s closing price.
As per the outline of Nokia’s plan, a minimum of 70 per cent of the transaction will be settled in cash. Furthermore, Infinera’s shareholders are going to receive up to 30 per cent of the consideration in the form of Nokia’s American depository shares (ADSs).
The merger between the two high profile companies is considered to be a strategic move to improvise the market positions and to enhance the technological capabilities of both of them. “Both the telecom giants see the merger as a significant opportunity to increase the scale and profitability that can enable the combined business to accelerate the development of new products and solutions for the benefits of their customers. The transaction aligns strongly with Nokia’s strategy, as it is expected to strengthen the company’s technology leadership in optical and increase exposure to web scale customers, the fastest growing segment of the market,” Nokia stated.
The company even is expecting a double-digit operating margin in its optical network business after the acquisition is finally processed. it is believed that the company’s net comparable operating synergies will reach EUR 200 million by 2027. President and CEO, Nokia, Pekka Lundmark mentioned about the importance of the acquisition and sees it as a great opportunity. “In 2021 we increased our organic investment in Optical Networks with a view to improving our competitiveness. That decision has paid off and has delivered improved customer recognition, strong sales growth and increased profitability. We believe now is the right time to take a compelling inorganic step to further expand Nokia’s scale in optical networks.”
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Infinera is highly acclaimed for its production of optical semiconductors and networking equipment and is the service provider for both fixed-line and mobile telecommunication markets. After the acquisition, it is expected that Nokia’s technological capabilities will get a boom and help strengthen its presence in the market, especially in North America.
