Sweden’s Ericsson snaps up cloud firm Vonage in $6.2 bln deal

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  • Ericsson to purchase Vonage for $6.2 bln
  • Deal one of many largest in Ericsson’s historical past
  • Ericsson shares fall 3.8%

STOCKHOLM, Nov 22 (Reuters) – Ericsson (ERICb.ST) on Monday agreed to purchase cloud communications firm Vonage (VG.O) in a $6.2 billion all-cash deal, because the telecom gear maker strikes to broaden its 5G portfolio.

The deal, one of many largest in Ericsson’s historical past, follows its $1.1 billion buy of Cradlepoint final yr which gave it entry to instruments that may join gadgets utilizing the so-called Internet of Things over a 4G or 5G community.

U.S-based Vonage makes Application Programming Interface (API), which helps totally different software program talk with one another.

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“Vonage is complementary to what we have built in enterprise so far … Cradlepoint was one of the big stepping stones as well in building an enterprise presence,” Ericsson CFO Carl Mellander advised Reuters.

Ericsson pays $21 for every excellent Vonage share, a 28% premium to Friday’s closing value and a 34% premium to the typical of the final 3 months, a value analysts stated was excessive.

Ericsson shares fell 3.8% in early commerce, on monitor for his or her worst day since July and the worst performer on the pan-European STOXX 600 index (.STOXX).

“We see this acquisition as strengthening Ericsson’s vertical integration and product offering within the cloud space, but we also deem the price-tag quite steep,” stated Danske Bank Credit Research analyst Mads Rosendal.

Vonage, which operates throughout sectors similar to healthcare, finance, schooling and transportation, had gross sales of $1.4 billion in the 12-month interval to Sept. 30, 2021, with a margin on adjusted earnings earlier than curiosity, tax and depreciation of 14% and free money circulate of $109 million.

It has greater than 1 million registered builders and greater than 120,000 enterprise prospects.

“That’s where magic happens when developers use the Vonage platform to create applications for various enterprises,” Mellander stated.

The acquisition marks a brand new section after a interval of restructuring and refocusing since Borje Ekholm took over as CEO in 2017.

Ericsson had branched out into multi-media in the early 2000s however struggled to suit its purchases into its operations, weighing on margins and earnings.

“The transaction builds upon Ericsson’s stated intent to expand globally in wireless enterprise, offering existing customers an increased share of a market valued at $700 billion by 2030,” Ericsson stated in a press release.

It stated it anticipated the Vonage deal to spice up earnings per share – excluding non-cash amortisation impacts – and free money circulate from 2024 onwards.

The deal is anticipated to shut in the primary half of 2022, topic to Vonage shareholder approval, regulatory approvals, and different situations.

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Reporting by Simon Johnson, Supantha Mukherjee, and Helena Soderpalm, Editing by Louise Heavens, Kirsten Donovan

Ericsson logo is seen at its headquarters in Stockholm, Sweden June 14, 2018. REUTERS/Olof Swahnberg/File Photo