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Spring-based Hewlett Packard Enterprise Co. (NYSE: HPE), the largest publicly traded tech company in the Houston area, has reached a deal to acquire California-based Juniper Networks Inc. (NYSE: JNPR).
HPE will pay $40 per share in cash, or approximately $14 billion, the company said after markets closed Jan. 9. That's higher than the $13 billion deal the Wall Street Journal and other publications expected, and it represents a premium of approximately 32% to the closing price of Juniper's stock on Jan. 8, before news of the potential deal broke.
The deal, which is expected to close in late 2024 or early 2025, requires approval by Juniper shareholders as well as regulatory approvals and satisfaction of other customary closing conditions.
To fund the purchase, HPE has financing commitments for $14 billion from Citigroup Global Markets Inc., JPMorgan Chase Bank NA and Mizuho Bank Ltd. Part of that financing eventually will be replaced with a combination of new debt, mandatory convertible preferred securities and cash on the balance sheet, HPE said.
The deal is expected to double HPE's high-margin networking business, which handles data for companies across branch, campus, remote worker and data center locations.
"The explosion of (artificial intelligence) and hybrid cloud-driven business is accelerating demand for secure, unified technology solutions that connect, protect, and analyze companies’ data from edge to cloud," HPE said. "These trends, and AI specifically, will continue to be the most disruptive workloads for companies, and HPE has been aligning its portfolio to capitalize on these substantial IT trends with networking as a critical connective component."
After the deal closes, the new networking segment will increase from approximately 18% of total HPE revenue, as of fiscal year 2023, to approximately 31%. Juniper CEO Rami Rahim will lead the combined HPE networking business and will report to HPE President and CEO Antonio Neri.
“HPE’s acquisition of Juniper represents an important inflection point in the industry and will change the dynamics in the networking market and provide customers and partners with a new alternative that meets their toughest demands,” Neri said in a statement. “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.”
This is the largest deal HPE has made since naming the Houston area as its corporate headquarters in late 2020 and moving into its newly constructed headquarters campus in City Place north of Houston in early 2022. The $14 billion value also surpasses all but the largest Houston-area energy deals of 2023 — notably Exxon Mobil Corp.’s $59.5 billion acquisition of Pioneer Natural Resources Co. and Chevron Corp.’s $53 billion acquisition of Hess Corp., both of which were announced in October — and is similar in size to Houston-based Occidental Petroleum Corp.'s $12 billion deal to acquire Midland, Texas-based oil and gas producer CrownRock LP, which was announced in December.
Hewlett Packard Enterprise Co. was formed in 2015 when Hewlett-Packard Co. was split into HPE, which handles enterprise cloud services, and HP Inc. (Nasdaq: HPQ), which makes and markets personal computers and printers. The original Hewlett-Packard Co. dated back to 1939 and gained a strong presence in Houston thanks to its massive acquisition of Compaq Computer Corp. in 2002.
J.P. Morgan Securities LLC and Qatalyst Partners are serving as HPE’s financial advisers. Wachtell, Lipton, Rosen & Katz, Covington & Burling LLP, and Freshfields Bruckhaus Deringer LLP are serving as HPE's legal counsel. Goldman Sachs & Co. LLC is serving as Juniper’s exclusive financial adviser, and Skadden, Arps, Slate, Meagher & Flom is serving as legal counsel.