Nokia has announced an agreement to acquire Infinera, a global provider of open optical networking solutions and advanced optical semiconductors.
Under the terms of the deal, Infinera is valued at $6.65 per share, representing an enterprise value of approximately US$2.3 billion. That price reflects a 28% premium to Infinera’s closing share price on June 26, 2024, and a 37% premium to the trailing 180-day volume-weighted average price.
The offer allows for at least 70% of the consideration to be paid in cash, while Infinera shareholders may elect to receive up to 30% of the total consideration in Nokia ADSs. To address potential dilution from any equity consideration, Nokia’s board has committed to increasing and accelerating its ongoing share buyback program in addition to its existing €600 million buyback authority.
Nokia says the acquisition will create greater scale and enhance profitability, enabling faster development of new optical products and solutions for its customers. The move aligns with Nokia’s strategy to strengthen its leadership in optical networking and to expand its footprint in the fast-growing webscale customer segment.
Nokia expects the combined business to accelerate progress toward a double-digit operating margin in its optical networks division. The company is targeting around €200 million in net comparable operating profit synergies by 2027. Roughly one-third of those synergies are expected to arise from cost of sales efficiencies, with the balance coming from lower operating expenses through portfolio optimisation, integration benefits, and savings from reduced product engineering and standalone entity costs. Nokia also anticipates one-time integration expenses of about €200 million related to the transaction.
Together with the recent decision to divest its submarine networks unit, Nokia says the deal will reshape its Network Infrastructure business around three core pillars: Fixed Networks, IP Networks and Optical Networks. The company is targeting mid-single-digit organic growth for the overall Network Infrastructure segment and aims to lift its operating margin to the mid-to-high teens.
Nokia projects the acquisition will be accretive to comparable earnings per share in the first year after closing, with greater than 10% comparable EPS accretion expected by 2027. The expected return on invested capital is forecast to comfortably exceed Nokia’s weighted average cost of capital.
Pekka Lundmark, Nokia’s president and CEO, highlighted the strategic fit between the two companies, noting complementary customer bases, geographic reach and technology portfolios. Federico Guillén, president of Nokia’s Network Infrastructure business, said the acquisition will strengthen Nokia’s optical capabilities, broaden growth opportunities and support margin improvement. Infinera CEO David Heard welcomed the combination and said it will create greater value for customers by improving the ability to meet evolving needs in telecom networks, inter-data center links and intra-data center applications.
Key strategic benefits called out by Nokia include:
- Greater global scale and enhanced product development capacity, increasing the size of Nokia’s optical networks business by roughly 75%.
- Expanded in-house capabilities, including a larger digital signal processor development team and expertise in silicon photonics and indium phosphide semiconductor technologies.
- A stronger presence in the North American optical market to complement Nokia’s existing strengths across APAC, EMEA and Latin America.
- Faster expansion into enterprise and webscale customer segments; internet content providers account for over 30% of Infinera’s revenue.
- Advancement of high-speed, low-power optical components for intra-data center use cases, which are increasingly important for AI workloads.
The transaction is expected to close in the first half of 2025, subject to Infinera shareholder approval, regulatory clearances including antitrust and foreign investment reviews such as CFIUS where applicable, and customary closing conditions. Oaktree Optical Holdings, L.P., which held about 11% of Infinera common stock as of June 27, 2024, has agreed to vote its shares in favor of the deal.
Sale of submarine networks business
Separately, Nokia said it intends to sell Alcatel Submarine Networks (ASN) to the French State for an enterprise value of €350 million, while initially retaining a 20% stake. Nokia says the divestment will allow the company to focus on core markets and improve the profitability of its Network Infrastructure group.
Nokia expects this restructuring to reduce Network Infrastructure’s net sales by roughly €1 billion but to improve its operating profit margin by around 100–150 basis points. The company notes this transaction does not change its previously communicated financial outlook.
The ASN sale is expected to complete by late 2024 or early 2025, subject to consultation with ASN’s French Works Council and other customary regulatory and closing approvals.
(Photo by JJ Ying)
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