Swedish telecommunications equipment maker Ericsson entered into an agreement to purchase cloud communications firm Vonage for $6.2 billion, the companies announced Nov. 22.
The merger agreement, which was approved unanimously by Vonage’s board, builds upon Ericsson’s intent to expand globally in wireless enterprise.
Its larger than Ericsson’s last acquisition, made last year, of wireless networking company Cradlepoint for $1.1 billion.
“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,” said Ericsson President and Chief Executive Officer Börje Ekholm. “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.”
Vonage sales were $1.4 billion in the 12-month period up to Sept. 30, 2021. Over the same period, Vonage delivered an adjusted EBITDA margin of 14% and free cash flow of $109 million, the company said. Vonage Communications Platform serves over 120,000 customers and more than 1 million registered developers globally.
Vonage CEO Rory Read said that joining Ericsson “is in the best interests of our shareholders and is a testament to Vonage’s leadership position in business cloud communications, our innovative product portfolio, and outstanding team.”
According to the merger agreement, Ericsson will acquire all of Vonage’s outstanding shares at an all-cash price of $21 per share. The acquisition will be financed through Ericsson’s existing cash resources, which was $9.8 billion on a gross basis or $6.2 billion on a net basis as of Sept. 30.
The transaction is expected to deliver near-term revenue synergy opportunities, including white-labelling and cross-selling of the combined product portfolio estimated to contribute $400 million by 2025, according to the announcement.
Upon completion, Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its existing name. Vonage’s 2,200 employees will remain with the company and Read will join the Ericsson executive team, reporting to Ekholm.
The transaction is subject to Vonage shareholder approval, regulatory approvals and other customary conditions, and is expected in the first half of 2022.