Nokia buys US firm Infinera to bolster optical networks

(Sharecast News) - Shares in California-based network connectivity solutions group Infinera were surging ahead of the opening bell on Friday after Finnish telecoms giant Nokia agreed to pay $2.3bn to take over the company in a bid to increase its scale in optical networks. The deal, according to a statement from Nokia late on Thursday, will create a "highly scale and truly global optical business with increased in-house technology capabilities and vertical integration".

The Finnish group said it is targeting net comparable operating profit synergies of €200m by 2027 and the takeover would be accretive to earnings in the first year after completion.

The transaction values Infinera at $6.65 a share, a 28% premium to its closing price on Wednesday. At least 70% of the total consideration will be paid in cash while Infinera shareholders can elect to receive up to 30% in the form of Nokia ADS shares.

Nokia said it would "increase and accelerate" its share buyback program to offset the dilution from the deal.

Infinera's stock was rising 17% to $6.16 by 0628 in New York, while Nokia shares were up 1.1% at €3.54 in Helsinki.

"In 2021 we increased our organic investment in Optical Networks with a view to improving our competitiveness. That decision has paid off and has delivered improved customer recognition, strong sales growth and increased profitability," said Nokia's president and chief executive Pekka Lundmark.

"We believe now is the right time to take a compelling inorganic step to further expand Nokia's scale in optical networks. The combined businesses have a strong strategic fit given their highly complementary customer, geographic and technology profiles."