Infinera shares surge following Nokia acquisition news; Stifel downgrades rating to Hold
Nokia (NOK) has agreed to acquire Infinera (NASDAQ: INFN) in a $2.3 billion deal to strengthen its optical networks business. The announcement sent INFN shares soaring nearly 19% in premarket trading on Friday.
Nokia, known for its 5G cellular antennas and telecom infrastructure, expects that merging with networking solutions provider Infinera will expedite its goal of achieving double-digit operating margins in the optical networks sector.
Infinera shares surge following Nokia acquisition news
This transaction, alongside the recent sale of its submarine networks, will reshape Nokia’s Network Infrastructure business to focus on fixed networks, internet protocol networks, and optical networks.
The deal is valued at $6.65 per share, representing a 28% premium over Infinera’s closing stock price on Wednesday. At least 70% of the consideration will be paid in cash, with Infinera shareholders having the option to receive up to 30% in Nokia’s American depositary shares.
The $2.3 billion valuation includes the repurchase of Infinera’s $760 million in convertible notes. Nokia expects the acquisition to be accretive to its comparable earnings per share (EPS) in the first year post-closing and projects over 10% comparable EPS accretion by 2027.
“In addition to adding scale to Nokia’s core optical systems business, Infinera brings coherent digital signal processing (DSP) expertise, strong photonic integrated circuit (PIC) technologies, a portfolio and roadmap of coherent pluggable products, and US-based manufacturing, testing, and packaging,” analysts at Stifel commented.
Simultaneously, analysts downgraded INFN shares to Hold and trimmed the price target to $6.65.
“For Infinera, we believe that ongoing industry challenges in the telecom vertical created a challenging medium-term operating environment even as the company was, in our view, executing on its new product strategy,” analysts wrote.
Nokia (NOK) has agreed to acquire Infinera (NASDAQ: INFN) in a $2.3 billion deal to enhance its optical networks business. The announcement sent INFN shares soaring nearly 19% in premarket trading on Friday.
Nokia, renowned for its 5G cellular antennas and telecom infrastructure, anticipates that merging with networking solutions provider Infinera will accelerate its goal of achieving double-digit operating margins in the optical networks sector.
This transaction, alongside the recent sale of its submarine networks, will reshape Nokia’s Network Infrastructure business to focus on fixed networks, internet protocol networks, and optical networks.
The deal is valued at $6.65 per share, representing a 28% premium over Infinera’s closing stock price on Wednesday. At least 70% of the consideration will be paid in cash, with Infinera shareholders having the option to receive up to 30% in Nokia’s American depositary shares.
The $2.3 billion valuation includes the repurchase of Infinera’s $760 million in convertible notes. Nokia expects the acquisition to be accretive to its comparable earnings per share (EPS) in the first year post-closing and projects over 10% comparable EPS accretion by 2027.
“In addition to adding scale to Nokia’s core optical systems business, Infinera brings coherent digital signal processing (DSP) expertise, strong photonic integrated circuit (PIC) technologies, a portfolio and roadmap of coherent pluggable products, and US-based manufacturing, testing, and packaging,” analysts at Stifel commented.
However, analysts simultaneously downgraded INFN shares to Hold and reduced the price target to $6.65.
“For Infinera, we believe that ongoing industry challenges in the telecom sector have created a challenging medium-term operating environment, even as the company was, in our view, effectively executing its new product strategy,” analysts added.
