Ericsson's Deal to Buy Vonage Is Focus of Cfius Probe -- Update

By Stu Woo

The Committee on Foreign Investment in the U.S. is reviewing Ericsson AB's proposed $6.2 billion acquisition of Vonage Holdings Corp., Ericsson said, adding another regulatory challenge for the Swedish telecom-equipment giant in Washington.

Ericsson said the deal has cleared all other U.S. and foreign regulatory approval requirements. It said the companies were working with the committee, known as Cfius, a Treasury Department-led panel of federal agencies that determines how foreign deals for U.S. assets could affect national security.

Ericsson said it hopes to close the transaction before the end of July, a month later than it had previously forecast. A company spokesman declined to comment further.

In November, Ericsson agreed to pay $6.2 billion in cash to buy Vonage, a New Jersey-based company that was a pioneer in selling subscriptions for individuals to make voice calls over the internet. Vonage now focuses on providing businesses with internet-based telecommunications services for customer service, among other uses. It couldn't be learned why Cfius was reviewing the deal. Representatives for the Treasury Department didn't immediately return a request for comment.

Vonage shares closed at $17.58 on Monday, below Ericsson's agreement to pay $21 a share. Vonage has traded below the offer price for weeks, analysts say, because of uncertainty over the outcome of the U.S. regulatory review.

Ericsson spent much of the past decade trying to revitalize its core business of selling cellular-tower equipment and related infrastructure to catch up with China's Huawei Technologies Co., the industry leader. A U.S. push to curtail Huawei business around the world has benefited Ericsson and rival Nokia Corp.

The U.S. says the Chinese company can be compelled to spy on or disrupt telecommunications networks by Beijing. Huawei denies that.

The U.S. government has sought to provide financial assistance to developing countries, on the condition that they use Ericsson or Nokia gear, instead of Huawei or Chinese alternatives.

More recently, though, Ericsson has faced scrutiny in Washington. In April, Ericsson said it was likely to face fines from the Justice Department for failing to disclose allegedly paying bribes for access to terrorist-controlled areas in Iraq. Earlier this month, Ericsson said the Securities and Exchange Commission is also investigating the issue.

Ericsson has said that a 2019 internal investigation didn't identify any Ericsson employee directly involved in financing terrorist organizations, and that its internal investigation resulted in several disciplinary and remedial steps.

Write to Stu Woo at [e-mail]

(END) Dow Jones Newswires

June 28, 2022 07:38 ET (11:38 GMT)

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