Hewlett Packard Enterprise to acquire Juniper Networks in $13bn deal

March 2024 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

March 2024 Issue

In a move intended to boost the company’s artificial intelligence (AI) offering, Hewlett Packard Enterprise (HPE) has agreed to acquire networking gear manufacturer Juniper Networks in an all-cash $14bn deal.

Under the terms of the transaction, Juniper shareholders will receive $40 per share, a 32.4 percent premium to the stock’s closing price on 8 January, the day news of the deal first emerged. The acquisition is expected to complete in late 2024 or early 2025, subject to receipt of regulatory approvals, the approval of Juniper shareholders, and satisfaction of other customary closing conditions.

The deal, which is expected to be accretive to HPE’s non-generally accepted accounting principles earnings and free cash flow in the first-year post completion, is expected to be funded through financing commitments for $14bn in term loans.

“Our multi-year focus on innovative secure AI-native solutions has driven Juniper Networks’ outstanding performance,” said Rami Rahim, chief executive of Juniper Networks. “We have successfully delivered exceptional user experiences and simplified operations, and by joining HPE, I believe we can accelerate the next phase of our journey. In addition, this combination maximizes value for our shareholders through a meaningful all-cash premium. We look forward to working with the talented HPE team to drive innovation for enterprise, service provider and cloud customers across all domains, including campus, branch, data center and the wide area network.”

“HPE’s acquisition of Juniper represents an important inflection point in the industry and will change the dynamics in the networking market and provide customers and partners with a new alternative that meets their toughest demands,” said Antonio Neri, president and chief executive of HPE. “This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders.”

Juniper, which has an AI segment called Mist AI, is one of the few remaining independent companies from the dotcom era. Founded in 1996 as a rival to Cisco, the company went public in 1999 and reached a $65bn valuation in October 2000. But its stock price slumped when the dotcom bubble burst, and never again returned to those highs.

The company, which is significantly smaller than HPE, saw its revenue grow 12 percent year over year in 2022, the fastest growth since 2010. The company was on course to report full year 2023 revenues of $5.6bn. HPE generated sales of $29.1bn in its recently completed full fiscal year.

HPE said the addition of Juniper will boost margins and result in up to $450m in annual cost savings within three years of the deal’s completion, as well as accelerate growth. HPE’s networking segment was the company’s top source of quarterly earnings before taxes – $401m, on $1.4bn in revenue.

In October 2023, Juniper announced a restructuring plan which would remove hundreds of jobs, after a tough year in which some of its biggest customers in cloud computing and internet service providers pulled back on spending for new equipment. The company has also sought to integrate the latest AI tools, including incorporating generative AI programme ChatGPT into its control system for IT administrators.

The enterprise IT market is one of the bright spots in the tech M&A sector which has been adversely affected by antitrust scrutiny from regulators, ongoing market volatility and high interest rates. Notable recent deals in the space have included Cisco’s move to acquire data and security software company Splunk for $28bn in September and Broadcom’s $69bn acquisition of cloud software company VMware, which closed in November.

Richard Summerfield