Infinera Corp (NASDAQ: INFN) is up 20% on Friday after Nokia Oyj disclosed plans of buying the California-based company for $2.3 billion.
Shares of the telecommunications giant are roughly flat at writing.
Infinera stock valued at 27% premium
Nokia expects the Infinera acquisition to help strengthen its hold on the optical network space. Buying the Nasdaq-listed firm is also means for it to expand its footprint in North America.
The deal values each share of Infinera at $6.65 – about a 27% premium versus their previous close. Pekka Lundmark – the chief executive of Nokia said in a press release today:
Now is the right time to take a compelling inorganic step to further expand Nokia’s scale in optical networks. The combined businesses have a strong strategic fit given their highly complementary customer, geographic and technology profiles.
Infinera stock is now up close to 45% versus its year-to-date low.
Infinera to help boost Nokia profits
Infinera shareholders will receive at least 70% of the deal value in cash. The remaining 30% they can opt to receive in the American Depositary Shares of Nokia.
Nokia expects the Infinera transaction to close in the first six months of 2025. Its chief executive Pekka Lundmark is confident that the deal will deliver “significant value for shareholders”.
Infinera is expected to help Nokia boost its profits by more than 10% by 2027. It will also position Nokia second only to Huawei in terms of market share in optical networking. Nokia will have a 20% share in that market following the Infinera acquisition.
Wall Street currently has a consensus “overweight” rating on Nokia stock.
Infinera was in loss in its recent quarter
Buying Infinera will enable Nokia to grow its business with the tech titans as they continue to invest billions in data centres to play the AI boom.
The artificial intelligence market is expected to hit $1.0 trillion valuation within the next ten years. CEO Lundmark told Reuters in an interview on Friday:
AI is driving significant investments in data centres … one of the key attractions of this acquisition is that it significantly increased our exposure to data centres.
The news arrives more than a month after Infinera reported $307 million in revenue for its first quarter – down from $392 million a year ago.
Quarterly loss for INFN printed at $61.4 million versus $12.9 million of net income instead in Q1 of 2023. Still, David Heard – its chief executive said at the time:
We gained further traction with our new GX line system, won major awards with our ICE-X pluggables, and launched ICE-D, a new line of intra-datacenter solutions with the potential to drive dramatic power reductions, especially for AI workloads.
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