Hewlett Packard Enterprise Co HPE penned a deal to acquire Juniper Networks Inc JNPR for an all-cash transaction for $40.00 per share, representing an equity value of around $14 billion.
The purchase price represents a premium of around 32% to the unaffected closing price of JNPR's common stock on January 8, 2024, the last full trading day before media reports regarding a possible transaction.
The transaction is expected to be funded based on financing commitments for $14 billion in term loans. Such financing will eventually be replaced, in part, with a mixture of new debt, mandatory convertible preferred securities, and cash on the balance sheet.
The deal is anticipated to close in late calendar year 2024 or early calendar year 2025, subject to receipt of regulatory approvals, JNPR shareholders approvals, and customary closing conditions.
Post transaction closure, Juniper CEO Rami Rahim will lead the combined HPE networking business and will report to HPE President and CEO Antonio Neri.
Synergies: Post closure, the transaction is expected to be accretive to non-GAAP EPS and free cash flow in the first year.
Also, the combination is expected to achieve operating efficiencies and run-rate annual cost synergies of $450 million within 36 months.
The company expects strong growth in free cash flow and maintenance of capital allocation policies to reduce leverage to around 2x in two years.
In addition to the non-GAAP accretion, the combined company is expected to witness attractive top-and-bottom-line growth opportunities immediately and in the long term.
On a pro forma basis, as of FY23, the new networking segment will increase to approximately 31% of total HPE revenue (from about 18%) and contribute more than 56% of HPE's total operating income.
Antonio Neri, HPE CEO, said, "HPE's acquisition of Juniper represents an important inflection point in the industry and will change the dynamics in the networking market and provide customers and partners with a new alternative that meets their toughest demands."
"This transaction will strengthen HPE's position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders."
As of October 31, HPE had cash and cash equivalent of $4.58 billion.
Price Action: HPE shares closed lower by 8.92% at $16.14, and JNPR closed 21.81% higher at $36.81 on Tuesday.
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