Shares of Infinera Corporation (NASDAQ: INFN) experienced a significant uptick on the US stock charts following the announcement of a merger agreement. During the latest current-market session, the stock price of INFN increased by 17.67%, reaching $6.19.
Merger Agreement Details
The definitive agreement between Infinera (INFN) and Nokia calls for Nokia to buy Infinera for a price per share of $6.65, or an enterprise value of about $2.3 billion. In contrast, this deal provides a 28% premium over Infinera’s share price at yesterday’s closing price and a 37% premium over the trailing 180-day volume-weighted average price (VWAP).
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Strategic Impact
Both Nokia and Infinera perceive considerable opportunities in the merger to bolster scale and profitability, thereby accelerating the development of innovative products and solutions beneficial to customers. This transaction is in strong alignment with Nokia’s strategic objectives, particularly in enhancing its technological leadership in optical networks and increasing its engagement with webscale customers, the fastest-growing market segment.
Nokia anticipates substantial financial and strategic advantages from this combination, predicting that it will propel Nokia towards achieving a double-digit operating margin in its Optical Networks business. The company aims to realize EUR 200 million in net comparable operating profit synergies by 2027.
Impact On Network Infrastructure And Future Outlook
This merger, along with the recently announced sale of Submarine Networks, will reshape Nokia’s Network Infrastructure, establishing robust pillars in Fixed Networks, IP Networks, and Optical Networks. Nokia is targeting mid-single-digit organic growth for the overall Network Infrastructure business and aims to elevate its operating margin to mid-to-high teens.
The transaction is expected to positively impact Nokia’s comparable EPS within the first year post-closure and deliver over 10% comparable EPS accretion by 2027, with a return on invested capital (RoIC) comfortably surpassing Nokia’s weighted average cost of capital (WACC).
Network Infrastructure currently boasts a distinctive portfolio across fixed access, optical, and IP networks, underscored by leading technological innovation and strong customer focus. Through this merger, Infinera’s optical business sector will be further strengthened, growth potential will be expanded across all target client categories, and operating margins will be improved.
