Juniper to Acquire NetScreen

Network gear maker Juniper Networks Inc. said Monday that it would acquire network security company NetScreen Technologies Inc. for about $3.4 billion in stock in a bid to diversify away from the telephone companies that make up its customer base.

The move combines Juniper’s focus on telecommunications service providers such as Verizon Communications Inc. and Deutsche Telekom with NetScreen’s specialty in network security for corporations, such as Merrill Lynch & Co. Sunnyvale, Calif.-based Juniper is the No. 2 maker of network gear behind Cisco Systems Inc.

The deal initially valued NetScreen, also based in Sunnyvale, at about $4 billion and represented a 56% premium over NetScreen’s closing price Friday.

Shares of Juniper tumbled $3.29, or 11%, to $26.18 on Monday, while NetScreen soared $9.54, or 36%, to $35.94. Both are listed on Nasdaq.

“I can’t really justify the valuation,” said Ryan Tansey, a telecom analyst with John Hancock Funds. He did note, however, that Juniper was getting one of the best security products on the market. “I guess you have to pay for the quality.”

Juniper said the deal would close in the second quarter. The company said it would swap 1.404 of its shares for each share of NetScreen.