Sweden’s Ericsson said it has agreed to buy New Jersey-based cloud communications giant Vonage for $21 per share or $6.2 billion in cash to “expand its presence in wireless enterprise and broaden its global offerings.”
Vonage makes Application Programming Interface (API) — which helps different software communicate with each other.
The deal is expected to close in the first half of 2022, subject to Vonage shareholder approval, regulatory approvals and other customary conditions.
$21 per share represents a premium of 28% to Vonage’s closing share price on November 19, and a premium of 34% to the volume-weighted average share price over the three months to November 19.
The merger agreement was approved unanimously by the board of Vonage.
“The transaction builds upon Ericsson’s stated intent to expand globally in wireless enterprise, offering existing customers an increased share of a market valued at $700 billion by 2030,” said Ericsson.
Vonage operates in sectors including healthcare, finance, education and transportation, and had sales of $1.4 billion in the 12-month period to September 30, 2021, according to Reuters.
It has more than 120,000 business customers.
Danske Bank Credit Research analyst Mads Rosendal said: “We see this acquisition as strengthening Ericsson’s vertical integration and product offering within the cloud space, but we also deem the price-tag quite steep.”
Ericsson CEO Börje Ekholm said: “Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses.
“Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers.
“Then back it with Vonage’s advanced capabilities, in a world of 8 billion connected devices. Today we are making that possible.
“Today Network APIs are an established market for messaging, voice and video, but with a significant potential to capitalise on new 4G and 5G capabilities.
“Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs, exposed in a simple and globally unified way.
“This will allow them to develop new innovative global offerings. Communication Service Providers will be able to better monetize their investments in network infrastructure by creating new API driven revenues.
“Finally, businesses will benefit from the 5G performance, impacting operational performance, and share in new value coming from applications on top of the network.”
Vonage CEO Rory Read said: “Ericsson and Vonage have a shared ambition to accelerate our long-term growth strategy.
“The convergence of the internet, mobility, the cloud and powerful 5G networks are forming the digital transformation and intelligent communications wave, which is driving a secular change in the way businesses operate.
“The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave.”
“We believe joining Ericsson is in the best interests of our shareholders and is a testament to Vonage’s leadership position in business cloud communications, our innovative product portfolio, and outstanding team.”