HP Inc. today announced that it’s acquiring Poly, a major maker of business headsets and conference phones, in a $ 3.3 billion all-cash transaction.
The $ 3.3 billion price tag represents a more than 50% premium to the last closing price of Poly’s stock. HP expects to close the transaction by the end of the year.
NYSE-listed Poly, officially Plantronics Inc., is a major maker of communications hardware. The company provides conference phones, headsets and related equipment for enterprises, as well as software that help organizations manage the Poly hardware they deploy. The company’s hardware portfolio is made up in part of products that it obtained through its 2018 acquisition of Polycom Inc. for $ 2 billion.
Poly’s revenue declined 15.5%, to $ 409.6 million, last quarter in a drop attributed to supply chain constraints. Despite recent slowdown sales, however, HP believes that the acquisition of Poly will unlock significant growth opportunities in the long run.
HP pointed out in its announcement of the acquisition today that computer peripherals represent a $ 110 billion market. Moreover, the company estimates that this market is growing 9% annually. HP says that the workforce solutions category, where Poly also has a presence, is a $ 120 million market that is experiencing 8% annual growth.
HP’s own computer peripherals business has fared well in recent months. Last quarter, the company exceeded analyst expectations by growing its top line 9% to $ 17 billion. HP’s peripherals business, meanwhile, grew more than twice as fast during the quarter as its overall sales, increasing revenue by more than 20% year-over-year.
“The rise of the hybrid office creates a once-in-a-generation opportunity to redefine the way work gets done,” said HP Chief Executive Officer Enrique Lores (pictured). “Combining HP and Poly creates a leading portfolio of hybrid work solutions across large and growing markets. Poly’s strong technology, complementary go-to-market and talented team will help drive long-term profitable growth as we continue building stronger HP. ”
HP estimates that the acquisition of Poly will add $ 500 million to its annual revenues by its 2025 fiscal year. HP plans to achieve this revenue growth by cross-selling Poly products to its customers. Additionally, the company hopes to drive “incremental sales” by bundling Poly hardware with its personal computers.
Growth and operating margins will improve as well, HP projects. The company believes it can accelerate Poly’s annual revenue growth to a compound annual growth rate of 15% within three years of closing the acquisition. Additionally, HP expects Poly to achieve improved economies of scale following the acquisition that will help increase its operating margin by about 6% through 2025.
“The combination gives us an opportunity to dramatically scale, reaching new markets and channels, supercharging our innovation with a like-minded partner,” said Poly CEO Dave Shull.
The $ 3.3 billion purchase of Poly represents HP’s largest acquisition since it spun out of Hewlett-Packard Co. in 2015 to become an independent company. HP made its second-largest acquisition in 2017 when it bought Samsung Electronics Co. Ltd.’s printer business for $ 1.05 billion.