Ericsson to Buy Cloud Provider Vonage in $6.2 Billion Deal

(Bloomberg) — Ericsson has agreed to buy Vonage Holdings Corp. in the U.S. for an enterprise value of $6.2 billion as it strives to build market presence in cloud communications services.

Most Read from Bloomberg

New York City Is Building a Wall of Oysters to Fend Off Floods
A Denser City, But at What Cost?
The Women Behind Historic House Designs
From Bathhouses to Fisheries, Hidden Inflation Is Creeping Across Japan
Maverick 70-Year-Old CEO Is Determined to Shake Up Japanese Finance

The Swedish telecommunications group will pay $21 per share for Vonage using existing cash, according to a statement Monday. The offer represents an equity value of about $5.3 billion based on some 252 million shares outstanding.

Ericsson’s push into cloud-based services comes at a time as its earnings have been hampered by both lost business in China and component shortages from a global supply-chain squeeze. The company said on Monday that it remains fully committed to its long-term Ebita margin target of 15-18%.

“Vonage gives us a platform to help our customers monetize the investments in the network, benefiting developers and businesses,” said Ericsson’s Chief Executive Office Borje Ekholm.

The U.S. company’s cloud-based communications platform accounts for 80% of its $1.4 billion annual revenues and enables developers to embed services such as messaging or video into their products. That customer base and developer community is seen as a key draw for Ericsson.

Vonage itself had been under pressure from activist investor Jana Partners and was working with advisers to run a strategic review of the business. That review included the possibility of a full sale of the company, Bloomberg News reported in September.

Read More: Jana Partners Said to Build Vonage Stake With Review Ended

(Adds context throughout)