Vonage up 25% after it announced Ericsson is set to pay $6.2 billion to acquire it

Ericsson (NASDAQ: ERIC) has agreed to purchase Vonage Holdings (NASDAQ: VG) for roughly $6.2 billion, or $21 per share. Vonage’s Board of Directors unanimously approved this merger agreement. The transaction strengthens Ericsson’s intent to broaden its global offerings as well as expand its footprints in the wireless enterprise space. 

How does top management feel?

Ericsson’s Chief Executive Officer and President, Borje Ekholm, claims their main goal is to create industry-leading mobile networks via tech leadership. He claims that this will provide the foundation the company needs to come up with enterprise business operations. Mr. Ekholm said:

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The acquisition of Vonage is the next step in delivering on that strategic priority. Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses.

Mr. Ekholm asked people to imagine putting 5G’s capabilities and power in the hands of developers worldwide and then back this up with advanced capabilities Vonage is well known for. 

Vonage’s Chief Executive Officer, Rory Read, said both their company and Ericsson want to accelerate their long-term growth strategy. The cloud, robust 5G networks, and internet mobility are what’s helping form the intelligent communications and digital transformation wave. This wave is changing how businesses operate today. 

Mr. Read said:

The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave.

Mr. Read believes joining Ericsson is a testament to the company’s leadership positions in the cloud communications space and claims that the merger agreement is in the best interest of their shareholders. 

Vonage Communications Platform (VCP)

Vonage boasts a solid track record when it comes to margin and growth evolution. It recorded sales of around $1.4 billion in the last financial year. Over the same period, the company also managed to deliver $109 million worth of free cash flow and 14% adjusted EBITDA. 

The VCP (Vonage Communications Platform), an innovative cloud-based technology, serves more than 120,000 customers and over 1 million registered developers worldwide.