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Investing.com – Vonage stock (NASDAQ:VG) climbed 27% in Monday’s premarket trading as Ericsson (BS:ERICAs) offered to buy the Cloud-communications provider for $6.2 billion to expand its wireless enterprise business.
ADRs of Ericsson (NASDAQ:ERIC) fell more than 3% on valuation concerns surrounding the biggest deal in the history of the Swedish company. The maker of telecom equipment is paying $21 in cash for each share of Vonage, a 28% premium to its closing price on Friday.
Ericsson will fund the deal through internal accruals. It sees potential for the total addressable market for the Vonage Cloud-communications platform to hit $69 billion by 2025, from $31 billion in 2020.
The Cloud-communications industry has seen a flurry of activity lately as demand for digital services has boomed, attracting new investors and forcing companies to widen their offering for end-to-end solutions.
The likes of Vonage, which provide communications-platforms-as-a-service, have tools that companies use to interact with staff and customers through chat services, video and voice. Such services can be applied more widely with the 5G that operators all over the world are rolling out.
Ericsson expects the transaction to be EPS accretive. Vonage employs 2,200 people and its sales totaled $1.4 billion in the 12 months ended September 30.
The Swedish company reiterated its 2022 target of a 12%-14% EBIT margin, excluding Vonage.
