Nokia labeled press reports about a potential acquisition of Juniper Networks as “rumors,” and said it is not currently in acquisition talks with the Silicon Valley company. Nokia stopped short of saying it is not in any type of strategic talks with the vendor, leaving open the possibility that the two companies may be discussing some type of cooperation. Juniper is a competitor to Alcatel-Lucent, which Nokia purchased last year.
Late Tuesday, CNBC reported that Nokia was interested in buying the company for approximately $16 billion, roughly the same amount Nokia paid for Alcatel-Lucent. Juniper’s stock price rocketed to a 3-month high on Wednesday, but has since settled back to its pre-report levels. CNBC published an update to its original report.
2017 has been a difficult year for Juniper. Sales have been sliding, and the company said recently that it would be “realigning its workforce” in an effort to control costs.
Nokia’s reported interest in Juniper was a departure from the traditional takeover talk that has surrounded the company in the past. Ericsson was widely expected to consider a bid for the Sunnyvale company after Nokia announced its purchase of Alcatel-Lucent.
Analyst Simon Leopold of Raymond James told investors he would have expected a financial buyer, rather than a strategic takeover for Juniper.
“We would have guessed that a private equity (PE) buyer would have been more likely than a strategic buyer,” wrote Leopold. “We believe Juniper has strong [free cash flow] at over $1 billion in 2018, and we could imagine a PE buyer valuing Juniper at 12-13x FCF, 15x net income or $12-13 billion, which corresponds to $35-37 a share.”
Leopold also noted that at the end of September, Nokia’s cash on hand totaled less than $8 billion, less than half the amount it would have needed to make this acquisition without taking on additional debt. Nokia’s purchase of Alcatel-Lucent was an all-stock deal, meaning that Alcatel-Lucent shareholders received shares of Nokia in exchange for their stock.
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