(AOF) – Ericsson loses 4.56% to SEK 93.73 after announcing the takeover of Vonage Holdings for around $ 6.2 billion in enterprise value. UBS says Ericsson wants to grow its corporate client base after buying Cradlepoint for $ 1.1 billion in 2020 and cloud services. The specialist considers the logic of this transaction positively for Ericsson, which wants to diversify beyond mobile networks and find new sources of revenue growth.
However, he recalls that the Swedish group is not known for its results in terms of integration.
Ericsson is offering $ 21 per Vonage Holdings share, offering a premium of just over 28% over Friday’s closing price. The merger agreement was unanimously approved by the board of directors of the American company specializing in communication solutions for businesses via the cloud. The acquisition will be funded from Ericsson’s existing liquidity.
Commenting on the acquisition, Börje Ekholm, CEO of Ericsson, said: “The core of our strategy is to build leading mobile networks through our technological leadership. (…) The acquisition of Vonage is the next step. in achieving this strategic priority. Vonage gives us a platform to help our customers monetize network investments, for the benefit of developers and businesses. “
Vonage’s revenue was $ 1.4 billion in the 12-month period ending September 30, 2021, and over the same period, Vonage posted an Adjusted EBITDA margin of 14 % and free cash flow of $ 109 million.
The transaction is expected to provide near-term revenue synergy opportunities, including in the form of white-label and cross-selling, which is estimated to contribute $ 400 million by 2025. Ericsson expects also to achieve some cost savings after the deal is closed. The transaction is expected to have a positive effect on adjusted earnings per share and free cash flow before mergers and acquisitions from 2024.
Upon completion of the transaction, Vonage will become a wholly owned subsidiary of Ericsson and continue to operate under its current name. It will be presented as a separate segment in Ericsson’s accounts.
Receive our latest news
Every morning, the information to remember about financial markets.