Ericsson agreed to buy cloud communications firm Vonage in a $6.2 billion all-cash deal, as the telecom gear maker moves to broaden its 5G portfolio, reported Reuters.
The deal, one of the largest in Ericsson’s history, follows its $1.1 billion purchase of Cradlepoint last year which gave it access to tools that can connect devices using the so-called Internet of Things over a 4G or 5G network.
US-based Vonage makes Application Programming Interface (API), which helps different software communicate with each other.
“Vonage is complementary to what we have built in enterprise so far … Cradlepoint was one of the big stepping stones as well in building an enterprise presence,” Ericsson CFO Carl Mellander told Reuters.
Ericsson will pay $21 for each outstanding Vonage share, a 28% premium to Friday’s closing price and a 34% premium to the average of the last 3 months, a price analysts said was high.
Ericsson shares fell 3.8% in early trade, on track for their worst day since July and the worst performer on the pan-European STOXX 600 index.
“We see this acquisition as strengthening Ericsson’s vertical integration and product offering within the cloud space, but we also deem the price-tag quite steep,” said Danske Bank Credit Research analyst Mads Rosendal.
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