On Monday, Ericsson entered into a $6.20 billion all-cash agreement to acquire Vonage, a cloud communications firm.
Accordingly, this move mirrored the efforts of the telecom gear maker in broadening its 5G portfolio worldwide.
In addition, the deal, one of the most significant engagements of Ericsson, came after the $1.10 billion purchase of Cradlepoint last year.
This allowed the Swedish company to access tools in connecting devices using the Internet of Things over a 4G or 5G network.
In the listed terms of the sale, the telecom giant will pay $21.00 for each outstanding Vonage share.
Subsequently, this includes a 28.00% premium to Friday’s closing price and a 34.00% to the average of the last three months.
The recent procurement also marked a new phase after a restructuring period since Borje Ekholm’s placement as CEO in 2017.
In the early 2000s, Ericsson diversified into multi-media, but it grappled to fit its purchases into its operations, resulting in wounded margins and profits.
The deal would end in the first half of 2022, subject to Vonage shareholder approval, regulatory approvals, and other conditions.
Moreover, Vonage is a US-based business that has a strong track record of growth and margin evolution.
It operates across various sectors such as healthcare, finance, education, and transportation. Also, it posted sales of $1.40 billion in the 12 months to September 30, 2021.
Additionally, it currently holds a margin on adjusted earnings before interest, tax, and depreciation of 14.00% and a free cash flow of $109.00 million.
Eventually, the accord would boost Vonage’s earnings per share and free cash flow from 2024 onwards.
Meanwhile, Ericsson unveiled its Intelligent Automation Platform last November 16, enabling any mobile network to be intelligently automated.
Accordingly, this is an open service management product that would support communications service providers in optimizing their network performance.
Also, it includes ecosystem innovation that assists software developers in creating products on a software-development toolkit.
The company explained that this advancement embraces the principle of openness and the evolution to open network architectures.
Subsequently, Ericsson’s investment in this platform mirrored its contributions to the development of Open RAN technologies.
However, its stocks plunged 3.77% or 0.41 points to $10.53 per share after posting the merger agreement deal.
Conversely, Vonage Holdings surged 26.15% or 4.28 points to $20.65 per share in the pre-market.
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