Breaking Down the Blockbuster Deal
In an all-cash transaction, Hewlett Packard Enterprise Co (NYSE:HPE) has inked a deal to acquire Juniper Networks Inc (NYSE:JNPR) for $40.00 per share, amounting to a staggering equity value of around $14 billion. This purchase price represents a premium of about 32% to the unaffected closing price of JNPR’s common stock on January 8, 2024, the last full trading day before media reports surfaced regarding a possible transaction.
Deal Details and Financing Commitments
The transaction is expected to be funded based on financing commitments for $14 billion in term loans. Such financing will ultimately be replaced, in part, with a mix 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, pending receipt of regulatory approvals, JNPR shareholders approvals, and customary closing conditions.
The Leadership Transition
Post the transaction closure, Juniper CEO Rami Rahim will lead the combined HPE networking business and will report to HPE President and CEO Antonio Neri.
Synergies and Growth Prospects
Following the closure, the transaction is expected to be accretive to non-GAAP EPS and free cash flow in the first year. Additionally, the combination is projected to achieve operating efficiencies and run-rate annual cost synergies of $450 million within 36 months. The company also anticipates robust growth in free cash flow and plans to uphold capital allocation policies to reduce leverage to approximately 2x in two years. On a pro forma basis, as of FY23, the new networking segment will contribute more than 56% of HPE’s total operating income.
Anticipated Impact and Reflections from HPE CEO
HPE CEO Antonio Neri expressed, “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.”
Financial Implications and Share Price Movement
As of October 31, HPE had a cash and cash equivalent of $4.58 billion. HPE shares closed lower by 8.92% at $16.14, and JNPR closed 21.81% higher at $36.81 on Tuesday.