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Nokia to acquire Infinera for $2.3 billion

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The company says the combination will expand its Optical Networks business, as well as increasing its expertise in silicon photonics and indium phosphide materials, and its competency in PIC technologies

Nokia has announced a definitive agreement under which it will acquire Infinera for US$ 2.3 billion. Nokia will pay at least 70 percent in cash and Infinera’s shareholders can elect to receive up to 30 percent of the aggregate consideration in the form of Nokia American Depositary Shares.

The two companies say they see a significant opportunity in merging to improve scale and profitability, enabling the combined business to accelerate the development of new products and solutions to benefit customers. Nokia expects the transaction to strengthen the company’s technology leadership in optical and increase exposure to webscale customers, the fastest growing segment of the market.

The company says the combination with Infinera is projected to accelerate its journey to a double-digit operating margin in its Optical Networks business. Nokia targets to achieve €200 million of net comparable operating profit synergies by 2027. The company says that this transaction along with the recently announced sale of Submarine Networks will create a reshaped Network Infrastructure built on three strong pillars of Fixed Networks, IP Networks and Optical Networks. Nokia targets mid-single digit organic growth for the overall Network Infrastructure business and to improve its operating margin to mid-to-high teens level.

Among several outcomes of the transaction that Nokia highlights is the significant in-house capabilities that the combined business will have. The company says these include an expanded digital signal processor development team, expertise across silicon photonics and indium phosphide-based semiconductor material sciences, and deeper competency in PIC technology.

“In 2021 we increased our organic investment in Optical Networks with a view to improving our competitiveness,” said Pekka Lundmark, president and CEO of Nokia. “That decision has paid off and has delivered improved customer recognition, strong sales growth and increased profitability. 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. With the opportunity to deliver over 10 percent comparable EPS accretion, we believe this will create significant value for shareholders.”

Federico Guillén, president of Network Infrastructure at Nokia, said: “Today, Network Infrastructure offers a unique portfolio across the fixed access, optical and IP networks domains built on leading technology innovation and a strong customer focus. This acquisition will further strengthen the optical pillar of our business, expand our growth opportunities across all our target customer segments and improve our operating margin. I am extremely pleased that we are bringing together these two talented and dedicated teams. Separately, we have long respected each other as competitors. Together, we find the logic of combination irresistible.”

David Heard, CEO of Infinera, said: “We are really excited about the value this combination will bring to our global customers. We believe Nokia is an excellent partner and together we will have greater scale and deeper resources to set the pace of innovation and address rapidly changing customer needs at a time when optics are more important than ever – across telecom networks, inter-datacentre applications, and now inside the datacentre. This combination will further leverage our vertically integrated optical semiconductor technologies. Furthermore, our stakeholders will have the opportunity to participate in the upside of a global leader in optical networking solutions.”

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