(Bloomberg) — Hewlett Packard Enterprise Co. agreed to purchase Juniper Networks Inc. for $14 billion in a transfer that can increase its presence in networking however raised skepticism from Wall Road.
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HPE, a maker of knowledge middle {hardware}, pays $40 a share in money for Juniper, the businesses mentioned Tuesday in an announcement. That worth represents greater than half of HPE’s $21 billion market worth and a 32% premium over Juniper’s closing worth of $30.22 on Monday earlier than talks of a deal emerged.
Networking, know-how that directs the move of knowledge between gadgets and throughout the web, would be the new core of HPE, Chief Govt Officer Antonio Neri mentioned in an interview after the settlement was introduced. That enterprise line will double in measurement as soon as the deal is closed, the corporate mentioned.
HPE mentioned it would finance the acquisition with time period loans that over time can be changed “with a mixture of latest debt, obligatory convertible most popular securities, and money.” The businesses count on the acquisition, which has been authorized by each boards, to be accomplished by late this calendar yr or early 2025.
Since Hewlett-Packard was break up in 2015 into two firms, HPE has centered on attempting to increase profitable enterprise strains resembling promoting high-powered computing and cloud providers. However the firm has struggled to develop at greater than about 2% over the previous few years. In November, HPE gave a income forecast that fell wanting analysts’ estimates after reporting a steep decline in server gross sales.
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Juniper, like its greater rival Cisco Techniques Inc., makes networking gadgets resembling routers and switches. The HPE-Juniper mixture will disrupt the business since “there was just one massive vendor,” Neri mentioned, referring to Cisco. “Right this moment we are literally making a second possibility — a way more trendy possibility that in the end prospects have been on the lookout for.”
Like a lot of the tech business, Juniper has touted the potential for brand spanking new synthetic intelligence providers to spice up development. Collectively, the businesses will excel in constructing information facilities and working networks for AI-enabled operations, Juniper CEO Rami Rahim mentioned in an interview. Rahim will lead the mixed networking enterprise and report back to Neri as soon as the deal is closed, the businesses mentioned.
The merger will assist HPE “fill a spot in its portfolio, increasing its information middle and cloud networking presence,” Bloomberg Intelligence analyst Woo Jin Ho wrote Tuesday earlier than the deal was introduced.
Many on Wall Road anticipated Spring, Texas-based HPE to make acquisitions after the corporate mentioned it will promote its stake in H3C for about $3.5 billion. The settlement marks the primary huge know-how deal of 2024, following the worst yr for mergers and acquisitions since 2013. After international offers hit a file of $3.82 trillion in 2021, they fell to $2.17 trillion final yr, in keeping with information compiled by Bloomberg.
Shares of HPE have been little modified in prolonged buying and selling. The inventory had its worst day since Could 2020, falling 8.9% to shut at $16.14 in New York following experiences the deal was imminent. Some analysts questioned the potential acquisition, saying HPE’s buy of a legacy tech firm like Juniper might complicate its development initiatives. Others known as out the dangers of an rising debt load or overlapping product strains resulting in buyer confusion.
“Juniper has lengthy been a struggling asset with share losses/excessive publicity to the service supplier market, and it’s unclear how easy integration can be, given totally different software program stacks,” Toni Sacconaghi, an analyst at Sanford Bernstein, wrote. Juniper’s inventory fell 7.8% in 2023 after an 11% drop in 2022.
Juniper shares have been little modified in prolonged buying and selling after the settlement was introduced. Earlier, the inventory jumped 22% — its finest day since January 2004 — to shut at $36.81. Analysts estimate annual income on the Sunnyvale, California-based firm will decline 2% to $5.51 billion in 2024. Juniper had 11,506 workers as of Sept. 30.
JPMorgan Chase & Co. and Qatalyst Companions served as HPE’s monetary advisers. Goldman Sachs Group Inc. served as Juniper’s adviser. Neri mentioned the acquisition needs to be accomplished inside the subsequent 12 months, and he doesn’t count on regulatory opinions to sluggish it down.
–With help from Michael Hytha.
(Updates with feedback from CEOs starting within the third paragraph.)
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