Heaptalk, Jakarta — Nokia announced its plan to acquire Infinera in a transaction valued at US$2.3 billion, or approximately $6.65 per share (06/27). At least 70% of the consideration is offered in cash, and up to 30% in stock.
With the acquisition, the Finnish telco will be able to scale up its optical networks business unit and increase exposure to webscale customers, primarily in North America. The combination with Infinera is expected to accelerate Nokia’s journey to a double-digit operating margin in its optical networks business.
The corporation aims to achieve €200 million of net comparable operating profit synergies by 2027. This transaction, along with the recently announced sale of submarine networks, will reshape the corporation’s network infrastructure, which is built on three pillars: fixed networks, IP networks, and optical networks. Nokia targets mid-single digit organic growth for the overall network infrastructure business and to improve its operating margin to mid-to-high teen level.
According to Pekka Lundmark, Nokia’s President and CEO, the corporation scaled its organic investment in the optical networks business unit in 2021 to improve its competitiveness. That decision has paid off, delivering improved customer recognition, strong sales growth, and increased profitability.
Improving the operating margin
“We believe now is the right time to take a compelling inorganic step to further expand Nokia’s scale in optical networks. The combined businesses have a strong strategic fit given their highly complementary customer, geographic and technology profiles. With the opportunity to deliver over 10% comparable EPS accretion, we believe this will create significant value for shareholders,” Pekka said in the company’s official statement (06/27).
Federico Guillén, Nokia’s President of Network Infrastructure, saw that this acquisition would further strengthen the optical pillar of the business, expand the growth opportunities across all target customer segments, and improve the operating margin. Guillén said, “I am extremely pleased that we are bringing together these talented and dedicated teams. Separately, we have long respected each other as competitors. Together, we find the logic of combination irresistible.”
Meanwhile, David Heard, Infinera’s CEO, stated, “We are really excited about the value this combination will bring to our global customers. We believe Nokia is an excellent partner, and together, we will have greater scale and deeper resources to set the pace of innovation and address rapidly changing customer needs at a time when optics are more important than ever – across telecom networks, inter-data center applications, and now inside the data center.”
Furthermore, Heard is optimistic that this combination will further leverage both entities’ vertically integrated optical semiconductor technologies. In addition, Infinera’s stakeholders will also have the opportunity to participate in the upside of being a global leader in optical networking services.
