The UK antitrust regulatory agency, the Competition and Market Authority (CMA), announced on June 19th local time that it has launched an investigation into the acquisition of Juniper Networks (JNPR. US) by HP Enterprise (HPE.US, also known as Huihe Technology).
On January 9th, more than five months ago, HP announced that it would acquire network equipment manufacturer JNPR.US for $14 billion in full cash to strengthen the company's artificial intelligence products and cloud computing development. The payment consideration proposed by HP to shareholders of Zhanbo Network is $40 per share (a 32.4% premium from the previous trading day).
This is the largest acquisition initiated by HP since 2008; It is also the largest acquisition in the global network equipment field since Nokia acquired Alcatel Lucent for 15.6 billion euros in 2016.
On November 1, 2015, HP officially completed the split and established HPE, which mainly sells server storage, networking, and other data center equipment, and HPQ, which mainly produces PCs and printers, respectively.
HPE's revenue in 2023 was $29.1 billion, with a net profit of $2.025 billion. The network department is the largest contributor to the company's pre tax profit, based on the $3 billion acquisition of Aruba Networks by HP in 2015. Aruba's current quarterly revenue exceeds $1 billion.
The target company that HPE plans to acquire this time, Zhanbo Network, was established in 1996 and has been deeply involved in the network equipment market for many years. It was once one of Cisco's competitors. In recent years, the cloud service sector has shown outstanding performance. Zhanbo Network's total net revenue in 2023 was 5.565 billion US dollars (5.301 billion US dollars in 2022), with a net profit of 310 million US dollars.
HPE CEO Antonio Neri stated during the quarterly earnings conference call in March this year that after acquiring Juniper Networks for $14 billion, HPE will enhance its comprehensive strategy from the edge to the cloud, accelerate the company's entire product portfolio through AI innovation, and "cover $180 billion in market opportunities through our merged IP (intellectual property)."
This transaction was originally planned to be completed by the end of this year or early 2025, and in addition to requiring approval from each shareholder, it also cannot bypass investigations by regulatory agencies in the United States, the United Kingdom, and the European Union.
The UK Competition and Market Authority is the first to initiate an antitrust investigation based on whether it will significantly reduce competition in any one or more goods or services markets in the UK. The investigation is divided into three stages. From June 19 to July 3, 2024, the first stage of the merged investigation will be initiated, and a decision will be made before August 14 on whether to advance the investigation to a more in-depth "second stage".
The acquisition of HP Enterprise and Zhanbo Network has cast a shadow over it.
There are similar precedents in the industry. On September 15, 2022, Adobe announced that it would acquire collaborative design software company Figma for approximately $20 billion, half in cash and the other half in Adobe stock exchange. After experiencing antitrust investigations by the European Union and the UK, Adobe was forced to abandon the transaction in December 2023. For this, Adobe also needs to pay Figma a breakup fee of $1 billion.
But this acquisition by HP Enterprise is not without the possibility of success. On September 21st last year, Cisco announced the acquisition of cybersecurity software company Splunk for $157 per share in cash, with a total transaction amount of approximately $28 billion. The acquisition case was completed in March this year. And HP's acquisition of Zhanbo Network is also an effort to compete with network equipment manufacturers such as Cisco.
On June 19th Eastern Time, HP Enterprise closed at $21.84, with a market value of $28.385 billion; Zhanbo Network closed at $35.54, with a market value of $11.55 billion.