Nokia, a network equipment manufacturer, has acquired Infinera, a Californian manufacturer of optical network solutions and semiconductors, for approximately 2.3 billion US dollars. This acquisition involves Nokia paying $6.65 per share for Infinera, which is 28 percent more than Infinera’s closing price on Wednesday. The deal is expected to enhance Nokia’s optical network business and accelerate product development, strengthening its market position, particularly in North America.
As a result of the acquisition, Nokia aims to achieve synergy benefits of 200 million euros in comparable operating profit by 2027. The deal is projected to improve Nokia’s operating profit and earnings per share in the first year, with a more than ten percent improvement in earnings per share by 2027. The purchase will be funded with a combination of cash and Nokia shares, with at least 70 percent of the price being paid in cash.
Nokia plans to increase its share buyback program to offset the transaction’s dilutive effect. The company believes that the acquisition has strong strategic and financial rationale and will expedite the achievement of a double-digit operating profit percentage in the Optical Networks business. Nokia’s CEO, Pekka Lundmark, expressed confidence in the deal, emphasizing the potential for significant added value for shareholders.
In addition to the Infinera acquisition, Nokia recently announced the sale of its submarine network business, creating a renewed Network Infrastructure business group consisting of three strong divisions: Fixed Networks, IP Networks, and Optical Networks. With increased investments in the optical networks business, Nokia aims to enhance competitiveness and achieve a ten percent improvement in comparable earnings per share. This move aligns with the company’s goal of achieving an annual organic growth rate of 4–6 percent and an operating profit margin of 14–18 percent for the entity.