Nokia (NOKIA.HE) is poised to receive unconditional approval from the European Union’s antitrust regulators for its $2.3 billion acquisition of Infinera (INFN.O), a U.S.-based manufacturer of optical semiconductors and networking equipment, sources familiar with the matter revealed on Friday, Reuters reported.
Nokia initially announced the acquisition in June 2023, marking a strategic move to expand its footprint in the optical networking market. The deal would position the Finnish telecommunications company as the second-largest vendor in the sector, securing a 20% market share. The leading competitor, Huawei, continues to dominate the market, benefiting from the limited presence of Western companies in China.
Strategic Implications of the Acquisition
The acquisition is expected to bolster Nokia’s ability to provide optical networking solutions to major technology companies such as Amazon (AMZN.O), Alphabet (GOOGL.O), and Microsoft (MSFT.O). These firms are heavily investing in data center infrastructure to support the growing demand for artificial intelligence applications.
Infinera has established a strong position in intra-data center communications, a critical segment involving server-to-server communication within data centers. With approximately 60% of its revenue generated from the United States, the acquisition aligns with Nokia’s goal of expanding its optical networking business, particularly in the North American market.
Financial and Regulatory Considerations
The European Commission, which is expected to conclude its preliminary review of the acquisition by February 26, has not provided any official comments on the matter. Nokia, in its financial statement released on January 30, reaffirmed its expectation that the deal would close within the first quarter of 2024.
Under the terms of the acquisition, Nokia will pay Infinera shareholders $6.65 per share, reflecting a 26.4% premium over Infinera’s closing stock price of $5.26 on the day prior to the announcement. Infinera’s shares surged nearly 22% following the news. The transaction will be financed with at least 70% cash, with shareholders having the option to receive up to 30% of the aggregate consideration in the form of Nokia’s American Depositary Shares.
Projected Impact on Nokia’s Financial Performance
Nokia anticipates that the acquisition will be accretive to its comparable earnings per share in the first year following the transaction’s completion. Additionally, the company projects that the deal will contribute over 10% to its profits by 2027.
By integrating Infinera’s cutting-edge optical semiconductor technology and networking solutions, Nokia aims to enhance its competitive edge in the global telecommunications industry, further solidifying its position in the high-growth optical networking sector.
