On Tuesday (09/01/2024), US network specialist Hewlett Packard Enterprise (HPE) announced that it intends to acquire leading provider of AI-native networks, Juniper Networks, Inc. Both companies have signed a corresponding agreement, according to HPE.

According to the agreement, HPE has agreed to pay $40 US dollars (USD) in cash for each Juniper Networks share. With this offer, HPE values the smaller competitor at a hefty $14 billion (approximately 12.8 billion euros).

The offer includes a solid takeover premium of 32.3% on the closing price of Juniper’s common stock on 08/01/2024, the last full trading day before media reports of a potential transaction.

Before I go into further details about the takeover, I would like to introduce you to the companies involved.

The companies involved in focus Juniper Networks, Inc., based in Sunnyvale, California (approximately 60 km south of San Francisco), develops and distributes network products and services worldwide. The company offers various routers (network devices that forward network packets between multiple computer networks) and switching products (coupling elements in computer networks).

In addition, Juniper Networks sells security products (service gateways, firewalls, and advanced malware protection) and network operating systems. The network specialist sells its products through direct sales, distributors, resellers, and original equipment manufacturers to end-users in the cloud, service provider, and enterprise sectors.

Juniper Networks employs approximately 11,000 employees, who generated a revenue of $5.65 billion (5.16 billion euros) and an operating profit (EBIT) of $513.3 million (469 million euros) in fiscal year 2023.

Hewlett Packard Enterprise Corporation, based in Spring, Texas (approximately 300 km south of Dallas), specializes in developing IT solutions and services. Specifically, the company develops and sells servers, converged data storage solutions, and network systems. In addition, HPE also offers financing for the digital transformation of companies.

HPE has 62,000 employees, who generated an annual revenue of $29.1 billion (approximately 26.6 billion euros) and an operating profit (EBIT) of $2.4 billion (approximately 2.2 billion euros) in fiscal year 2023.

HPE wants to strengthen AI and cloud business Through the acquisition of Juniper Networks, HPE wants to further expand its activities in the promising areas of artificial intelligence (AI) and cloud computing, as HPE CEO Antonio Neri emphasizes:

„This transaction will strengthen HPE’s position at the interface of accelerating macro AI trends, expand our overall addressable market, and drive further innovation for customers as we help connect the AI-native and cloud-native world together.“

Market reaction The price of Juniper Networks‘ stock rose sharply on 09/01/2024, the day of the announcement of the acquisition. It increased by 21.8% and closed at $36.81 after the closing bell on the New York Stock Exchange (NYSE).

This brought the price closer to the $40 offered by HPE. Investors apparently believe that the deal will go smoothly.

The same cannot be said for HPE’s stock price. It lost 8.9% on Tuesday and closed at $16.14. Apparently, investors believe that HPE is paying too much for the AI network specialist.

What comes next After the completion of the transaction, Juniper CEO Rami Rahim will lead the combined HPE network business and report to HPE President and CEO, Antonio Neri.

The transaction is expected to be completed by the end of 2024 or the beginning of 2025. Prior to that, Juniper shareholders must approve the deal by tendering their shares in sufficient numbers. In addition, the deal requires regulatory approvals and the fulfillment of other customary closing conditions.