HPE to Buy Juniper Networks for $14 Billion in Expansion Bet

HPE to Buy Juniper Networks for $14 Billion in Expansion Bet

Business
January 10, 2024 by secret
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(Bloomberg) — Hewlett Packard Enterprise Co. agreed to buy Juniper Networks Inc. for $14 billion in a move that will expand its presence in networking but raised skepticism from analysts and investors alike. Most Read from Bloomberg HPE, a maker of data center hardware, will pay $40 a share in cash for Juniper, the companies
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(Bloomberg) — Hewlett Packard Enterprise Co. agreed to buy Juniper Networks Inc. for $14 billion in a move that will expand its presence in networking but raised skepticism from analysts and investors alike.

Most Read from Bloomberg

HPE, a maker of data center hardware, will pay $40 a share in cash for Juniper, the companies said Tuesday in a statement. That price represents more than half of HPE’s $21 billion market value and a 32% premium over Juniper’s closing price of $30.22 on Monday before talks of a deal emerged.

The purchase “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,” HPE Chief Executive Office Antonio Neri said in the statement.

HPE said it will finance the deal with term loans that over time will be replaced “with a combination of new debt, mandatory convertible preferred securities, and cash.” The companies expect the acquisition, which has been approved by the boards, to be completed by late this calendar year or early 2025.

Since Hewlett-Packard was split in 2015 into two companies, HPE has focused on trying to expand lucrative business lines such as selling high-powered computing and cloud services. But the company has struggled to grow at more than about 2% over the past few years. In November, HPE gave a revenue forecast that fell short of analysts’ estimates after reporting a steep decline in server sales.

Read More: HPE Projects Sales Below Estimates With Server Demand Fears

Juniper makes routers and switches that direct the flow of information between computers and across the internet. Like much of the tech industry, Juniper has touted the potential for new artificial intelligence services to boost growth. A merger will help HPE “fill a gap in its portfolio, expanding its data center and cloud networking presence,” Bloomberg Intelligence analyst Woo Jin Ho wrote Tuesday before the deal was announced.

Once the deal is complete, Juniper CEO Rami Rahim will lead the combined networking business, reporting to Neri, the companies said.

Many on Wall Street expected Spring, Texas-based HPE to make acquisitions after the company said it would sell its stake in H3C for about $3.5 billion. The agreement marks the first big technology deal of 2024, following the worst year for mergers and acquisitions since 2013. After global deals hit a record of $3.82 trillion in 2021, they fell to $2.17 trillion last year, according to data compiled by Bloomberg.

Shares of HPE were little changed in extended trading. The stock had its worst day since May 2020, falling 8.9% to close at $16.14 in New York following reports the deal was imminent. Some analysts questioned the potential acquisition, saying HPE’s purchase of a legacy tech company like Juniper could complicate its growth initiatives. Others called out the risks of an increasing debt load or overlapping product lines leading to customer confusion.

“Juniper has long been a struggling asset with share losses/high exposure to the service provider market, and it is unclear how simple integration will be, given different software stacks,” Toni Sacconaghi, an analyst at Sanford Bernstein, wrote. Juniper’s stock fell 7.8% in 2023 after an 11% drop in 2022.

Juniper shares were little changed in extended trading after the agreement was announced. Earlier, the stock jumped 22% — its best day since January 2004 — to close at $36.81. Analysts estimate annual revenue at the Sunnyvale, California-based company will decline 2% to $5.51 billion in 2024. Juniper had 11,506 employees as of Sept. 30.

JPMorgan and Qatalyst Partners served as HPE’s financial advisers. Goldman Sachs Group Inc. served as Juniper’s adviser.

–With assistance from Ryan Gould and Michael Hytha.

(Updates with financing in the fourth paragraph.)

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