Ericsson to buy cloud firm Vonage for $6.2 billion
Visitors pass through the entrance to the Ericsson AB pavilion at the Mobile World Congress in Barcelona, Spain, on Tuesday, Feb. 26, 2013.
Simon Dawson | Bloomberg via Getty Images
Mobile telecoms equipment maker Ericsson said on Monday it had agreed to buy cloud communications firm Vonage for $6.2 billion.
The deal was the Swedish firm’s biggest in years and follows its acquisition of U.S.-based wireless networking company Cradlepoint for $1.1 billion in 2020.
“The merger agreement was approved unanimously by the Board of Vonage,” Ericsson said in a statement.
“The transaction builds upon Ericsson’s stated intent to expand globally in wireless enterprise, offering existing customers an increased share of a market valued at $700 billion by 2030.”
Vonage had sales of $1.4 billion in the 12-month period to Sept. 30 2021, with a margin on adjusted earnings before interest, tax and depreciation (EBITDA) of 14% and free cash flow of $109 million.
The acquisition marks a new phase after a period since Borje Ekholm took over as CEO in 2017.
He has focused on restructuring and refocusing the business after Ericsson branched out into multi-media in the early part of the 2000s.
It struggled to fit its purchases into its operations, weighing on margins and profits.
The cloud-based Vonage Communications Platform serves more than 120,000 customers and more than one million registered developers globally.
Ericsson said it expected the deal to boost earnings per share – excluding non-cash amortization impacts – and free cash flow from 2024 onwards.
The deal is expected to close in the first half of 2022, subject to Vonage shareholder approval, regulatory approvals, and other conditions.