HIVE stock is moving up big on Wednesday after Extreme Networks Inc (NASDAQ:EXTR) agrees to acquire Aerohive Networks Inc (NYSE:HIVE).
In a fresh development in the merger and acquisition space, Extreme Network has made an offer of $272 million to acquire rival Wi-Fi router maker Aerohive Networks. The offer is for an all-cash deal, and it was hardly a surprise that shares of Aerohive Networks rose by as much as 39% in early morning trade.
Extreme Networks has offered to pay $4.45 per HIVE share in the all-cash deal, and the company expects to complete the acquisition at some point by the end of this year. Usually, the shares of the company that is making the acquisition drop after such news breaks, but the shares of Extreme Networks actually rose by 7%. It is perhaps the clearest indication of the fact that the deal will be in the best interests of the company and allow it to expand its market share.
Aerohive has not had any trouble in finding customers for the Wi-Fi routers that it manufactures. According to data released by the company, Aerohive commands a customer base of 30,000, and the company has a daily user count of 10,000. Those are healthy numbers; where the trouble lays is with the company’s mounting losses and massive cash born since it first listed back in 2014. In 2018, the total sales generated by the company stood at $155 million, but at the same time, the losses stood at $18.1 million.
HIVE stock is up 39% at $4.44, and EXTR stock is trading higher by 7% to $6.13.
In its last report, Aerohive Networks stated that it has failed to achieve profitability at any point in the company’s history, and it was not sure when the company was going to become profitable.
Extreme Networks, on the other hand, has been in a bit of a flux of its own and the company’s shares have dived by as much as 20% from the highs achieved back in April this year. Moreover, the company’s forecast for 2019 failed to meet analysts’ expectations. In such a situation, this deal could prove to be just the boost that Extreme Networks needs. The company added in its statement that the acquisition will add $1.1 billion to its annual revenues.
After today’s rise, HIVE stock is up 35% since the beginning of this year.
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