HPE: Buy shares to help finance $14B Juniper Networks merger
Hewlett Packard Enterprise is turning to investors to help raise upward of $1 billion to fund its expensive purchase of networking rival Juniper.
The public offering of 27 million Series C Mandatory Convertible Preferred Stock at $50 per share is expected to raise $1.35 billion. HPE has granted to the underwriters in the Offering a 30-day option to buy up to an additional three million shares of Preferred Stock to cover “over-allotments, if any.”
“The proceeds from the Offering will be approximately $1.32 billion (or approximately $1.46 billion if the underwriters exercise their option to purchase additional shares) after deducting the underwriting discount but before expenses,” said the server and storage maker.
“HPE intends to use the net proceeds from the Offering to fund all or a portion of the consideration for the previously announced pending acquisition of Juniper Networks, Inc. (the ‘Juniper Acquisition’), to pay related fees and expenses, and, if any proceeds remain thereafter, for other general corporate purposes.”
The stock offer is scheduled to be “consummated” on or around September 13 – a Friday, so unlucky for some. And of course it is subject to customary closing conditions.
With a price of $14 billion agreed for Juniper, the share issue will hardly touch the sides of the overall funding, though every little bit helps, we suppose. HPE confirmed the $40-per-share bid for Juniper in January, a move it said will double the size of its networking business.
The emphasis is on seizing the perceived opportunity to exploit the ever-expanding market for AI. Or as HPE boss Antonio Neri put it all those months ago: “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.”
Juniper investors, or at least some of them, might not agree. In February, the company was accused of violating US securities law in a shareholder lawsuit. It alleges Juniper’s communications with shareholders misrepresented or omitted financial arrangements between HPE and Juniper execs, Juniper’s financial forecasts, and the data that underpinned those calculations.
The sale of Juniper to HPE has already received approval from competition regulators in the EU, UK, India, and several other jurisdictions, Neri said on HPE’s recent Q3 FY 2024 earnings call.
“We remain on track to close in late calendar 2024 or early calendar 2025. Plans are well under way to ensure successful integration post close,” the CEO said.
HPE’s share price in the year to date has fluctuated, rising on the back of mounting orders for AI servers and slipping recently due to the profit generated by sales of those compute boxes lowering the overall margin mix.
As for the share offering later this week, HPE issued some financial jargon to the effect that unless converted earlier at the option of the holders or redeemed at the option of HPE, “each share of Preferred Stock will automatically convert into a number of shares of common stock on or around September 1, 2027, into between 2.5352 and 3.1056 shares of common stock of the Company, par value $0.01 per share, subject to customary anti-dilution adjustments, determined based on the volume-weighted average price of the Common Stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day prior to September 1, 2027.” ®