Ericsson will close the deal later this month, after passing muster with U.S. Committee on Foreign Investments
Ericsson said Friday that federal regulators have approved its acquisition of enterprise cloud services company Vonage. The $6.2 billion all-cash deal met with the approval of both company’s boards and shareholders, but was temporarily held up while the Committee on Foreign Investments in the United States (CFIUS) investigated.
“Ericsson today announced that it has received clearance from the Committee on Foreign Investments in the United States (CFIUS) to complete its acquisition of Vonage Holdings Corp. This represents the final requisite approval to complete the deal. The parties now expect the Merger to close no later than July 21, 2022, as provided for in the Merger Agreement,” said the company in a statement acknowledging the regulatory approval.
Regulatory approval is the final step to seal the deal, which was first announced in November 2021. The transaction will be Ericsson’s largest acquisition to date, valued at $6.2 billion at the time of the announcement. For Ericsson, the Vonage acquisition gives it a firm footing in a diversified wireless enterprise portfolio.
“Imagine putting the power of the 5G network—a massive, global innovation platform—at the fingertips of developers, and then backing it with Vonage advanced communications services in a world of 8 billion connected devices,” said Ericsson President and CEO Börje Ekholm in a video posted to his Twitter account at the time of the announcement. “Today, with this announcement, we are making that ambition possible.”
Sweden-based Ericsson had hoped to close the deal in the first half of 2022, but those efforts were derailed by the CFIUS, the government agency responsible for reviewing business and real estate transactions that involve foreign investment. U.S. regulators have put Ericsson under intense scrutiny for its involvement in a bribery scandal involving the militant Islamic group ISIS, operating in Iraq.
Ericsson admitted in a 2019 report that its executives may have made payments to ISIS as far back as 2011. The company noted that the investigation found serious breaches of compliance rules and its own code of business ethics. Specifically, Ericsson identified evidence of corruption-related misconduct, including: Making a monetary donation without a clear beneficiary; paying a supplier for work without a defined scope and documentation; using suppliers to make cash payments; funding inappropriate travel and expenses; and improper use of sales agents and consultants. In addition, it found violations of Ericsson’s internal financial controls; conflicts of interest; non-compliance with tax laws; and obstruction of the investigation.
The U.S. Securities and Exchange Commission (SEC) opened a probe into Ericsson’s conduct in Iraq in June. Ericsson pledged to cooperate fully with the investigation, but was careful to note that it was too soon to determine, much less predict, the outcome of that investigation. Ericsson previously said it would likely be fined by the U.S. authorities over the transgression.
Vonage was first founded in 1998 as a provider of residential telecom services using Voice over IP (VoIP). It expanded from the US to Canada in 2004 and then to the UK in 2005. Over the following decade, Vonage refocused its efforts from home phone services to enterprise cloud services. That was reflected in a series of acquisitions of companies that offer on-demand cloud services to enterprises. Today, Vonage exists as a Communication Platform as a Service (CPaaS) provider for both consumers and businesses. The company now offers unified corporate communications and contact center services, a library of Application Programming Interfaces (APIs) for app developers, and other cloud-hosted services.
