Nokia (NOK) has agreed to acquire Infinera (NASDAQ:INFN) in a $2.3 billion deal to strengthen its optical-networks business. The announcement sent INFN shares soaring nearly 19% in premarket trading Friday.
Nokia, known for its 5G cellular antennas and telecom infrastructure, expects that merging with networking solutions provider Infinera will expedite its goal of achieving double-digit operating margins in the optical networks sector.
This transaction, alongside the recent sale of its submarine networks, will reshape Nokia's Network Infrastructure business to focus on fixed networks, internet-protocol networks, and optical networks.
The deal is valued at $6.65 per share, representing a 28% premium over Infinera's closing stock price on Wednesday. At least 70% of the consideration will be paid in cash, with Infinera shareholders having the option to receive up to 30% in Nokia’s American depositary shares.
The $2.3 billion valuation includes the repurchase of Infinera's $760 million in convertible notes. Nokia expects the acquisition to be accretive to its comparable earnings per share (EPS) in the first year post-closing and projects over 10% comparable EPS accretion by 2027.
“In addition to adding scale to Nokia’s core optical systems business, INFN adds coherent digital signal processing (DSP) expertise, strong photonic integrated circuit (PIC) technologies, a portfolio and roadmap of coherent pluggable products and US-based manufacturing, testing and packaging,” analysts at Stifel commented.
Simultaneously, analysts downgraded INFN shares to Hold and trimmed the price target to $6.65.
“For INFN, we believe that ongoing industry challenges in the telecom vertical created a challenging medium-term operating environment even as the company was, in our view, executing on its new product strategy,” analysts wrote.