HP Inc. to acquire Poly in all-cash transaction for $40 per share
HP Inc. (HPQ) announced a definitive agreement to acquire Poly (POLY), a global provider of workplace collaboration solutions, in an all-cash transaction for $40 per share, implying a total enterprise value of $3.3B, inclusive of Poly’s net debt.
The company said, “The acquisition accelerates HP’s strategy to create a more growth-oriented portfolio, further strengthens its industry opportunity in hybrid work solutions, and positions the company for long-term sustainable growth and value creation.
The rise of hybrid work is creating sustained demand for technology that enables seamless collaboration across home and office environments.
Approximately 75% of office workers are investing to improve their home setups to support new ways of working. Traditional office spaces are also being reconfigured to support hybrid work and collaboration, with a focus on meeting room solutions.
Currently, there are more than 90 million rooms, of which less than 10% have video capability. As a result, the office meeting room solutions segment is expected to triple by 2024.
Poly will help drive the growth and scale of HP’s peripherals and workforce solutions businesses.
Peripherals represent a $110B segment opportunity growing 9% annually, driven by the need for more immersive experiences.
Workforce solutions represent a $120B segment opportunity that is growing 8% annually, as companies invest in digital services to set up, manage, and secure more distributed IT ecosystems.
Poly’s devices, software and services, combined with HP’s strengths across compute, device management, and security, creates a robust portfolio of hybrid meeting solutions.
Poly, previously known as Plantronics, is a leader in video conferencing solutions, cameras, headsets, voice and software.
Together, HP and Poly will deliver a complete ecosystem of devices, software, and digital services to create premium employee experiences, improve workforce productivity, and provide enterprise customers with better visibility, insights, security, and manageability across their hybrid IT environments.”
HP expects the transaction to be immediately accretive to HP’s revenue growth, margins, and non-GAAP EPS at close.
With the expanded value proposition of a complete hybrid work solution, combined with HP’s scale and go-to-market capabilities, HP expects to realize substantial revenue synergies in peripherals as well as meeting room and workforce solutions.
HP will be able to cross-sell across its global commercial and consumer sales channels, while driving incremental sales from combining Poly’s products with HP’s PC portfolio.
As a result, HP expects to achieve $500 million of revenue synergies by FY25 and accelerate Poly’s revenue growth to an approximately 15% CAGR over the first three years after closing.
In addition, HP expects the transaction to improve Poly’s operating margins by approximately six percentage points from current levels by FY25, driven by scale efficiencies across supply chain, manufacturing and overhead. The transaction is expected to close by the end of calendar 2022, subject to Poly stockholder approval, required regulatory clearances, and the satisfaction of other customary closing conditions.
HP will finance the transaction through a combination of balance sheet cash and new debt. This transaction is consistent with HP’s capital returns program target.
HP remains committed to aggressively buying back shares of at least $4B in FY22, and to returning significant capital to shareholders while continuing to invest in growth.
POLY is up $13.14 to $39.34.
STOCKWINNERS
To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.