Ericsson has entered into an agreement to acquire Vonage for a total acquisition price of approximately $6.2 billion (€5.4bn).
The merger agreement was approved unanimously by the Board of Vonage. 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.
Börje Ekholm, President and CEO of Ericsson, commented: “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 monetise the investments in the network, benefitting developers and businesses. 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.”
“Today Network APIs are an established market for messaging, voice and video, but with a significant potential to capitalise on new 4G and 5G capabilities. Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs, exposed in a simple and globally unified way. This will allow them to develop new innovative global offerings. Communication Service Providers will be able to better monetise their investments in network infrastructure by creating new API driven revenues. Finally, businesses will benefit from the 5G performance, impacting operational performance, and share in new value coming from applications on top of the network,” added Ekholm.
Rory Read, CEO of Vonage, said: “Ericsson and Vonage have a shared ambition to accelerate our long-term growth strategy. The convergence of the internet, mobility, the cloud and powerful 5G networks are forming the digital transformation and intelligent communications wave, which is driving a secular change in the way businesses operate. The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave.” We believe 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.”
For Ericsson, the acquisition builds on the success of the integration of Cradlepoint in September 2020.
Vonage is a global provider of cloud-based communications. Sales were $1.4 billion in the 12-month period to September 30th 2021, and over the same period, Vonage delivered an adjusted EBITDA margin of 14 per cent and free cash flow of $109 million. The cloud-based Vonage Communications Platform (VCP) serves over 120,000 customers and more than one million registered developers globally.
VCP accounts for approximately 80 per cent of Vonage’s current revenues and delivered revenue growth in excess of 20 per cent in the three-year period to 2020, with adjusted EBITDA margins moving from -19 per cent in 2018 to break-even in the 12-month period to 30 September 2021. Vonage’s management team projects annual growth of over 20 per cent for VCP in the coming years.
In the longer term, Ericsson says it intends to offer value benefits to the full ecosystem – telecom operators, developers, and businesses – by creating a global platform for open network innovation, built on Ericsson and Vonage’s complementary solutions.
The acquisition will be conducted by means of a merger agreement through which Ericsson will acquire all of Vonage’s outstanding shares at an all-cash price of $21 per share. The merger consideration represents a premium of 28 per cent to Vonage’s closing share price on November 19th 2021 of $16.37 per share, and a premium of 34 per cent to the volume-weighted average share price over the 3 months to November 19th 2021 of $15.71 per share.