Leading U.S. VOIP Provider Receives $6.2B Buyout Bid From Swedish Telecom Giant

Source: Streetwise Reports   11/22/2021

Vonage Holdings Corp. shares traded 27% higher after the company reported it entered into an agreement to be acquired by L.M. Ericsson in an all-cash deal for $21.00 per share.

Prior to the open of U.S. markets today, global digital, cloud-based communications company Vonage Holdings Corp. (VG:NASDAQ) announced that it entered into an agreement to be acquired by European telecommunications infrastructure, services and software provider Ericsson (ERIC:NASDAQ) for $21.00 per share in cash, or a total enterprise value of approximately $6.2 billion.

Vonage Holdings indicated that its Board of Directors has already unanimously approved the merger transaction. The report stated that the $21.00 per share purchase price represents a 28% premium to Vonage’s $16.37 closing share price on Friday, November 19, 2021 and is 34% higher than the 90-day, volume-weighted average share price of $15.71 per share.

The companies claimed that the purchase is well aligned with Ericsson’s strategy to globally expand its presence in the $700 billion annual wireless enterprise market and will serve to “spearhead the creation of a global network and communication platform for open innovation.”

Vonage Holdings Corp.’s CEO Rory Read commented, “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.”

Ericsson’s President and CEO Börje Ekholm remarked, “The core of our strategy is to build leading mobile networks through technology leadership. This provides the foundation to build an enterprise business. The acquisition of Vonage is the next step in delivering on that strategic priority. 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.”

Ekholm continued, “Today Network APIs are an established market for messaging, voice and video, but with a significant potential to capitalize 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.”

The report mentioned that in September 2020, Ericsson acquired Cradlepoint, a U.S.-based maker of Wireless WAN Edge 4G and 5G solutions for the enterprise market and was successful in integrating Cradlepoint into its own operations.

The purchase of Vonage offers Ericsson full ownership of Vonage and its communications platform (VCP). Vonage is a worldwide cloud communications provider with annual sales of around $1.4 billion which in Q3/21 delivered an adjusted EBITDA margin of 14% and free cash flow of about $109 million. The company stated that its VCP has over one million registered developers and 120,000 customers. The company explained that “VCP allows developers to embed high quality communications – including messaging, voice and video – into applications and products, without back-end infrastructure or interfaces.” The report pointed out that VCP is responsible for roughly 80% of its total revenues.

The report stated that the Vonage’s strong presence in the Communication Platform as a Service (CPaaS) space will give Ericsson immediate access a complementary and significant growth business segment. Ericsson aims to benefit from increased telecommunications industry investments in 4G and 5G and the robust ecosystems, applications and networks now being developed.

The firms noted that the transaction is expected to close in H1/22, subject to approval by Vonage’s shareholders, ordinary closing conditions and regulatory approvals. The report advised that upon closing, Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its same name.

Ericsson has a market cap of about $33.5 billion and is one of the largest telecommunications infrastructure, equipment, software and communication network services providers in Europe.

Vonage is a global cloud communications company headquartered in Holmdel, N.J. The company’s platform offers clients and developers capabilities of integrating chat, messaging, video, voice and verification into existing applications, systems and workflows.

Vonage began the day with a market cap of around $4.1 billion with approximately 252.5 million shares outstanding and a short interest of about 7.9%. VG shares opened nearly 25% higher today at $20.42 (+$4.05, +24.74%) over Friday’s $16.37 closing price and reached a new 52-week high price this morning of $20.81. The stock has traded today between $20.375 and $20.79 per share and closed at $20.79 (+$4.42, +27.00%).

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