In an effort to keep up in the accelerating AI arms race, cloud-services provider Hewlett Packard Enterprise Co. on Tuesday agreed to buy Juniper Networks, Inc. in a deal worth around $ 14 billion.
Under the terms of the deal, Hewlett Packard Enterprises HPE, -8.92% will acquire Juniper JNPR, +21.81% — which makes communications-networking products and also has an AI segment called Mist AI — for $ 40 a share. The companies expect the deal to close late this year or in early 2025.
“The acquisition is expected to double HPE’s networking business, creating a new networking leader with a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value,” the companies said in a release.
Beltway law firm Freshfields is providing antitrust counsel to HPE, which is sure to receive scrutiny from the Federal Trade Commission, which has routinely opposed large tech mergers for more than a year.
After the deal is completed, Juniper Chief Executive Rami Rahim will lead the combined HPE networking business, and report to HPE CEO Antonio Neri.
“This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders,” Neri said in a statement.
HPE said the addition of Juniper will boost margins and result in up to $ 450 million in annual cost savings within three years of the deal’s completion, as well as accelerate growth. HPE’s networking segment was the company’s top source of quarterly earnings before taxes, $ 401 million, on $ 1.4 billion in revenue.
HPE’s deeper plunge into networking closes a chapter of sorts. Then-Hewlett-Packard Co. acquired Aruba Networks for about $ 3 billion in March 2015, months before Silicon Valley’s original garage startup split in half, resulting in the formation of HPE, which sells servers and other equipment for data centers, and HP Inc. HPQ, -2.71%, which makes PCs and printers.
The Wall Street Journal reported the possibility of a deal on Monday, sending shares of Juniper higher.
Shares of Juniper JNPR, +21.81% rose 0.5% after hours, after jumping 21.8% during regular trading hours. Hewlett Packard HPE, -8.92% shares were down 0.4% after hours, after falling 8.9% during the day.
As of Tuesday’s close, Juniper had a market cap of $ 9.64 billion, while HPE’s was $ 23.04 billion.
The companies hope the deal can provide a much-needed jolt after a series of lackluster quarterly earnings. Juniper shares have gained 15.7% over the past 12 months, while HPE shares are down 5.4% over that span. The S&P 500 SPX, in comparison, is up about 21.4% over the past year.
For decades, Juniper has lagged rival Cisco Systems Inc. CSCO, -1.09% in the networking-equipment market. In its most recent quarter, Juniper reported net income of $ 76 million on revenue of $ 1.4 billion, down 1% from the same quarter a year earlier.
“I see the tie up as a strong play for the growing demand in networking to power AI,” Daniel Newman, CEO of The Futurum Group, said in a message to MarketWatch.