Hewlett Packard Enterprise (HPE) announced its intention to acquire Juniper Networks, a prominent networking equipment manufacturer, for approximately $14 billion in cash, translating to $40 per share.
The completion of this transaction is expected towards the end of this year or early 2025, as per HPE's statement. This news follows a recent report by the Wall Street Journal about advanced discussions between the two companies.
Following the Journal's report, Juniper's stock experienced a significant surge, recording its highest single-day gain in two decades on Tuesday. The stock closed at $37.05, a 22% increase. The proposed acquisition price reflects a 32% premium over Juniper's stock price prior to the Journal's story.
HPE anticipates that the acquisition will positively contribute to its adjusted earnings per share in the first year following the deal's conclusion.
This acquisition marks a significant expansion of HPE's networking sector, which has been in stiff competition for years. Post-acquisition, Juniper CEO Rami Rahim is set to head the merged entity, reporting to HPE CEO Antonio Neri.
HPE's previous major move in the networking domain was the acquisition of Aruba Networks in 2015. This was followed by HP's split into HPE, focusing on data center equipment, and HP Inc., dedicated to PCs and printers.
By incorporating Juniper into its operations, HPE aims to enhance profit margins and accelerate growth.
Juniper, established in 1996, has been a long-standing competitor to Cisco in the networking equipment sector. In 2022, Juniper saw a 12% increase in revenue, its highest since 2010. The company recently reported a $76 million profit on $1.4 billion in revenue, a slight decline from the previous year.
HPE's networking division has been a major contributor to its pre-tax earnings, generating $401 million on $1.4 billion in revenue, up 41%.
The merger is projected to yield $450 million in annual cost savings within three years post-completion.
Details of the deal will be further discussed in a conference call scheduled for 8:30 a.m. ET on Wednesday.
Advising HPE on the deal are JPMorgan and Qatalyst.