BY Richard Summerfield
Ericsson has agreed to acquire cloud-based services group Vonage in an all-cash, $6.2bn deal, which is expected to close in the first half of 2022, subject to Vonage shareholder approval, regulatory approvals and other conditions.
Under the terms of the deal, Ericsson will pay $21 for each outstanding Vonage share, a 28 percent premium to Friday’s closing price and a 34 percent premium to the average of the last three months.
The deal, Ericsson’s biggest ever, marks the company’s latest attempt to diversify away from its core mobile infrastructure business following a failed attempt to move into media in the 2010s.
Vonage, which had sales of $1.4bn in the year to the end of September, tried to sell its legacy consumer business but abandoned the sale in February. The company had a market value of about $3.6bn in September before activist investor Jana Partners started agitating for it to sell itself or break up. Vonage operates across sectors such as healthcare, finance, education and transportation.
“The core of our strategy is to build leading mobile networks through technology leadership,” said Börje Ekholm, president and chief executive of Ericsson. “This provides the foundation to build an enterprise business. The acquisition of Vonage is the next step in delivering on that strategic priority. Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses. Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers. Then back it with Vonage’s advanced capabilities, in a world of 8 billion connected devices. Today we are making that possible.”
“Ericsson and Vonage have a shared ambition to accelerate our long-term growth strategy,” said Rory Read, chief executive of Vonage. “The convergence of the internet, mobility, the cloud and powerful 5G networks are forming the digital transformation and intelligent communications wave, which is driving a secular change in the way businesses operate. The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave. We believe joining Ericsson is in the best interests of our shareholders and is a testament to Vonage’s leadership position in business cloud communications, our innovative product portfolio, and outstanding team.”
Ericsson said the deal would be financed through its existing cash pool. The company also noted that it expected revenue synergies of about $400m and some cost efficiencies from the transaction, which should be accretive to adjusted earnings per share and free cash flow by 2024.
News: Sweden's Ericsson snaps up cloud firm Vonage in $6.2 bln deal