Infinera's Stock Soars 18% After Nokia Purchases It for $2.3 Billion

Shares of Infinera Corp. surged 18% in after-hours trading on Thursday following the announcement that Finnish telecom giant Nokia Corp. has agreed to acquire the San Jose, California-based optical telecom equipment manufacturer for $2.3 billion.

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Nokia’s deal values Infinera at $6.65 per share, which represents a 28% premium over Infinera’s closing share price on Wednesday and a 37% premium over the trailing 180-day volume-weighted average price, as stated by the companies.

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According to the agreement, Nokia will pay at least 70% of the transaction in cash, with Infinera shareholders having the option to receive the remainder in Nokia American Depositary Shares. Nokia’s board has committed to increasing and accelerating its share buyback program to counteract the dilution resulting from the deal.

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The acquisition is expected to positively impact Nokia’s comparable per-share earnings within the first year after the deal closes and to achieve over 10% comparable EPS accretion by 2027, the companies announced.

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Nokia Chief Executive Pekka Lundmark described the combined businesses as “a strong strategic fit,” highlighting their complementary customer bases, geographic presence, and technological capabilities. Lundmark emphasized that the EPS accretion would generate significant value for shareholders.

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Infinera Chief Executive David Heard expressed enthusiasm about the merger, stating, “This combination will further leverage our vertically integrated optical semiconductor technologies. Additionally, our stakeholders will have the chance to benefit from the growth of a global leader in optical networking solutions.”

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Infinera’s shares rose nearly 2% during the regular trading session on Thursday and have increased by 11% so far this year, compared to the S&P 500 index’s approximate 15% gain.

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The acquisition of Infinera by Nokia represents a strategic move to enhance Nokia’s position in the optical networking market. By integrating Infinera’s advanced optical semiconductor technologies, Nokia aims to expand its technological capabilities and customer reach, particularly in regions and markets where Infinera has a strong presence.

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Nokia’s commitment to funding the acquisition primarily with cash demonstrates its strong financial position and confidence in the strategic benefits of the merger. The option for Infinera shareholders to receive Nokia American Depositary Shares provides an opportunity for them to remain invested in the combined entity and potentially benefit from its future growth.

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The pledge to accelerate the share buyback program reflects Nokia’s proactive approach to managing shareholder value and mitigating any potential dilution from the transaction. This move indicates Nokia’s intention to maintain a balanced capital structure and ensure that the acquisition delivers long-term value to its shareholders.

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The expected EPS accretion in the first year post-close and the projected 10% increase in comparable EPS by 2027 underscore the financial benefits of the deal. These projections suggest that the acquisition will enhance Nokia’s profitability and earnings growth, contributing to a stronger financial performance in the coming years.

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Overall, the acquisition of Infinera aligns with Nokia’s strategic objectives of expanding its technological capabilities, enhancing its market presence, and delivering value to its shareholders. The combination of Nokia’s and Infinera’s complementary strengths is anticipated to create a more competitive and innovative player in the optical networking market, capable of meeting the evolving demands of customers and staying ahead in a rapidly changing industry.

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Nokia’s strategic acquisition of Infinera for $2.3 billion highlights a significant move to strengthen its position in the optical telecom equipment sector. The deal, valuing Infinera at a premium, is structured with a substantial cash component and offers Infinera shareholders the option to receive Nokia American Depositary Shares. Nokia's commitment to an accelerated share buyback program aims to offset dilution, while the projected EPS accretion signifies potential financial benefits. This merger is poised to leverage the strengths of both companies, creating a robust and innovative player in the optical networking market.

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