Hewlett Packard Enterprise (HPE) is set to acquire Juniper Networks in an all-cash transaction valued at approximately $14 billion. The acquisition, with a price of $40.00 per share, marks a strategic move to accelerate AI-driven innovation, enhancing secure, unified, cloud, and AI-native networking.
Hewlett Packard Enterprise (NYSE: HPE) is one of the global edge-to-cloud enterprises, enabling organizations to accelerate outcomes by extracting value from their data. With a rich history of envisioning the future and pioneering innovations, HPE offers distinctive, open, and intelligent technology solutions delivered as services. The comprehensive portfolio spans Cloud Services, Compute, High Performance Computing & AI, Intelligent Edge, Software, and Storage, ensuring a seamless experience across diverse clouds and edges. This helps customers to forge new business models, foster innovative engagements, and elevate operational performance. Juniper Networks, on the other hand, works on simplifying network operations to enhance end-user experiences. Their solutions provide leading insights, automation, security, and AI capabilities, translating into tangible business results.
The combination of HPE and Juniper is expected to double HPE’s networking business, positioning the company as one of new leaders in the sector. The transaction is anticipated to be accretive to non-GAAP EPS and free cash flow in the first year post-close, contributing to HPE’s sustainable profitable growth strategy. The strategic move aligns with HPE’s goal to capitalize on the growing demand for secure, unified technology solutions amid the acceleration of AI and hybrid cloud-driven business. The combined company aims to provide customers with a complete, secure portfolio that manages and simplifies their expanding connectivity needs from edge to cloud.
Upon the successful conclusion of the deal, Rami Rahim, the current CEO of Juniper, will assume the leadership of the combined HPE networking business, reporting directly to Rami Rahim, Mr Neri expressed the significance of HPE’s acquisition of Juniper, characterizing it as a pivotal moment in the industry that will reshape the dynamics of the networking market. He anticipates that the transaction will fortify HPE’s position amidst the accelerating trends in macro-AI, expanding its total addressable market and fostering further innovation. Mr Neri conveyed his enthusiasm about the collaboration, welcoming Juniper’s skilled workforce to the HPE team. He highlighted the synergies between the two companies, citing their complementary portfolios and established track records of driving industry innovation.
Rami Rahim, Juniper’s CEO, underscored the company’s multi-year focus on innovative, secure AI-native solutions, which has fueled Juniper Networks’ outstanding performance. Mr Rahim emphasized their successful delivery of exceptional user experiences and streamlined operations. Joining forces with HPE, Mr Rahim sees an opportunity to accelerate the next phase of their journey. He believes that the combination not only maximizes value for Juniper’s shareholders through a significant all-cash premium but also positions them to drive innovation across various domains, including campus, branch, data center, and the wide area network.
The combined entity is poised to have a compelling pro forma financial profile, anticipating immediate and long-term growth opportunities in both top and bottom lines. The acquisition strategically positions HPE for sustained long-term growth, enhancing shareholder return and bolstering investment capacity. With Juniper onboard, HPE’s portfolio will pivot towards higher-growth, higher-margin businesses, unlocking significant free cash flow potential. On a pro forma basis, the new networking segment is projected to contribute over 56% to HPE’s total operating income, increasing from approximately 18% in fiscal year 2023.
The synergy between HPE and Juniper brings forth complementary capabilities to deliver next-generation AI-native networking. This collaboration aims to enable new digital experiences through secure, intelligent connectivity. Networking is envisioned as the core business and architectural foundation for HPE’s Hybrid Cloud and AI solutions, facilitated by the HPE GreenLake hybrid cloud platform. The combined company will provide end-to-end AI-native solutions, leveraging cloud infrastructure, high performance, and experience-centric design. Additionally, it will possess the ability to collect, analyze, and act on aggregated telemetry across a broader installed base, enhancing end-user experiences and streamlining network operations.
The acquisition accelerates HPE’s strategic evolution and substantially expands its total addressable market. It opens avenues for providing more comprehensive solutions to Juniper’s existing customer base, spanning enterprise, communication service providers, and tier-one cloud customers. Moreover, the deal propels HPE into adjacent large segments, including data center networking, firewalls, and routers. It significantly amplifies Juniper’s footprint in data centers and cloud providers.
Under the unanimously approved agreement by the Boards of Directors of HPE and Juniper, Juniper shareholders are set to receive $40.00 per share in cash upon the transaction’s completion, representing a premium of approximately 32%. The $14 billion funding for the transaction is initially based on term loans and will be subsequently replaced, in part, with a mix of new debt, mandatory convertible preferred securities, and existing cash on the balance sheet. The transaction’s expected closing timeframe is late calendar year 2024 or early calendar year 2025, subject to regulatory approvals, Juniper shareholder approval, and fulfillment of customary closing conditions.
Anticipated operating efficiencies and annual cost synergies of $450 million within 36 months post-close, coupled with robust free cash flow growth, are expected to support the reduction of leverage to approximately 2x within two years post-close. Post-transaction completion, HPE commits to maintaining its focus on innovation and go-to-market investments in its networking business, a strategic growth engine for the company.
The acquisition of Juniper is part of HPE’s strategic evolution, positioning the company for long-term growth and expanding its total addressable market. The combined company is expected to offer comprehensive solutions to Juniper’s installed base of customers while venturing into adjacent segments like data center networking, firewalls, and routers. The transaction is subject to regulatory approvals, Juniper shareholder approval, and other customary closing conditions. HPE expects the deal to close in late calendar year 2024 or early calendar year 2025. The combination is projected to achieve operating efficiencies and run-rate annual cost synergies of $450 million within 36 months post-close.
Financial advisors for HPE include J.P. Morgan Securities LLC and Qatalyst Partners, while Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A., and Mizuho Bank, Ltd. are providing committed financing for the transaction. Legal counsel is being provided by Wachtell, Lipton, Rosen & Katz, Covington & Burling LLP, and Freshfields Bruckhaus Deringer LLP for HPE and Skadden, Arps, Slate, Meagher & Flom for Juniper.
