How much is HPE paying for Juniper Networks?

HPE is paying $40.00 per Juniper share in cash, for an equity value of approximately $14 billion. The price represents a premium of about 32% to Juniper's unaffected closing price on January 8, 2024.

How will HPE fund the acquisition?

HPE has a $14 billion senior unsecured delayed draw term loan commitment, consisting of an $11 billion 364-day tranche and a $3 billion three-year tranche. HPE expects to replace part of this financing with new debt, mandatory convertible preferred securities, and cash on the balance sheet. HPE's obligation to close is not subject to a financing condition.

What happens if the deal fails?

The termination fees depend on the reason for failure. Juniper pays HPE $407.5 million in cases such as a superior proposal, a board recommendation change, or a stockholder vote failure followed by a related acquisition within 12 months. HPE pays Juniper $815 million if the deal fails on the End Date or due to a regulatory order while other conditions are satisfied, or if HPE materially breaches its reasonable best efforts covenant on regulatory approvals.

When is the transaction expected to close, and what could delay it?

HPE expects the deal to close in late calendar 2024 or early calendar 2025. Key conditions include Juniper stockholder approval, HSR and specified foreign antitrust and investment clearances without a Burdensome Condition, and the absence of any injunction. The Merger Agreement has an initial 12-month End Date with up to three automatic three-month extensions if only regulatory conditions remain unsatisfied.

What financial benefits does management expect?

Management expects the deal to be accretive to non-GAAP EPS and free cash flow in the first year after closing, with $450 million in run-rate annual cost synergies within 36 months. It also expects leverage to fall to about 2x within two years after close. These are forward-looking projections subject to the risks described in the filing, and the filing does not provide audited financial support for them.

HPE/HPE-PC 8-K: Material Agreements & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed January 10, 2024. Cited figures are marked; the original filing is the authoritative source.

Hewlett Packard Enterprise (HPE) has agreed to acquire Juniper Networks in an all-cash transaction valued at about $14 billion^a, or $40.00 per Juniper share, representing a premium of roughly 32% to Juniper's unaffected closing price on January 8, 2024.

The Merger Agreement, signed January 9, 2024, is subject to Juniper stockholder approval, U.S. HSR and specified foreign antitrust and investment clearances without a Burdensome Condition, and other customary conditions. HPE's obligation to close is not subject to a financing condition, and the deal is expected to close in late calendar 2024 or early 2025. The filing describes a $14 billion^b senior unsecured delayed draw term loan commitment ($11 billion 364-day and $3 billion three-year tranches) that HPE expects to refinance partly with new debt, mandatory convertible preferred securities, and cash on hand.

For investors, the key economic terms are the break-up protections. Juniper owes HPE a $407.5 million^c termination fee in specified circumstances, including a superior proposal or a board change of recommendation. HPE owes Juniper an $815 million termination fee if the deal fails on the End Date or due to a regulatory injunction and all other conditions are satisfied, and also if HPE materially breaches its covenant to use reasonable best efforts to obtain regulatory approvals.

The largest risk for HPE is therefore regulatory: the $815 million^d fee is a meaningful cost if antitrust review blocks the deal. HPE's management frames the transaction as accretive to non-GAAP EPS and free cash flow in year one, with $450 million of run-rate cost synergies within 36 months and leverage targeted at about 2x two years after close. Strategically, management says the deal roughly doubles HPE's networking business, lifting the networking segment from about 18% to about 31% of pro forma revenue and contributing more than 56% of pro forma operating income.

Juniper CEO Rami Rahim would lead the combined networking business. The filing's press-release and investor-presentation materials are furnished, not filed, and the forward-looking statement warnings are extensive, so the synergy, accretion, and leverage figures are management projections rather than audited results.

02—Key points

Key Highlights

Acquisition of Juniper Networks for $40.00 per share in cash, an equity value of about $14 billion and a premium of roughly 32% to the unaffected January 8, 2024 closing price.
Financing: $14 billion senior unsecured delayed draw term loan commitment from Citigroup, JPMorgan, and Mizuho, to be partly replaced by new debt, mandatory convertible preferred securities, and balance sheet cash. No financing condition applies.
Juniper termination fee of $407.5 million, payable to HPE in cases such as a superior proposal, a board recommendation change, or a stockholder vote failure followed by a related acquisition within 12 months.
HPE termination fee of $815 million, payable to Juniper if the deal fails on the End Date or due to a regulatory injunction while other conditions are met, or if HPE breaches its regulatory efforts covenant.
Management projects non-GAAP EPS and free cash flow accretion in year one post close, $450 million in run-rate cost synergies within 36 months, and leverage of about 2x within two years.
Closing conditions include Juniper stockholder approval, HSR and specified foreign antitrust clearances without a Burdensome Condition, and no material adverse effect on Juniper. Expected close is late 2024 or early 2025.
Pro forma networking segment rises from about 18% to about 31% of HPE revenue and contributes more than 56% of operating income, with Juniper CEO Rami Rahim leading the combined networking business.

03—Questions

Frequently Asked Questions

How much is HPE paying for Juniper Networks?
HPE is paying $40.00 per Juniper share in cash, for an equity value of approximately $14 billion. The price represents a premium of about 32% to Juniper's unaffected closing price on January 8, 2024.
How will HPE fund the acquisition?
HPE has a $14 billion senior unsecured delayed draw term loan commitment, consisting of an $11 billion 364-day tranche and a $3 billion three-year tranche. HPE expects to replace part of this financing with new debt, mandatory convertible preferred securities, and cash on the balance sheet. HPE's obligation to close is not subject to a financing condition.
What happens if the deal fails?
The termination fees depend on the reason for failure. Juniper pays HPE $407.5 million in cases such as a superior proposal, a board recommendation change, or a stockholder vote failure followed by a related acquisition within 12 months. HPE pays Juniper $815 million if the deal fails on the End Date or due to a regulatory order while other conditions are satisfied, or if HPE materially breaches its reasonable best efforts covenant on regulatory approvals.
When is the transaction expected to close, and what could delay it?
HPE expects the deal to close in late calendar 2024 or early calendar 2025. Key conditions include Juniper stockholder approval, HSR and specified foreign antitrust and investment clearances without a Burdensome Condition, and the absence of any injunction. The Merger Agreement has an initial 12-month End Date with up to three automatic three-month extensions if only regulatory conditions remain unsatisfied.
What financial benefits does management expect?
Management expects the deal to be accretive to non-GAAP EPS and free cash flow in the first year after closing, with $450 million in run-rate annual cost synergies within 36 months. It also expects leverage to fall to about 2x within two years after close. These are forward-looking projections subject to the risks described in the filing, and the filing does not provide audited financial support for them.

04—Continue

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