Ericsson, a mobile telecoms equipment maker, announced on Monday that it has agreed to buy Vonage, a cloud communications company, for $6.2 billion.

The transaction follows the Swedish corporation's $1.1 billion purchase of Cradlepoint, a wireless networking company based in the United States, last year.

The purchase price is a 28% premium over Vonage's Friday closing share price of $16.37 per share.

The deal is expected to be completed in the first half of 2022, according to Ericsson. The acquisition will be funded from the company's financial reserves.

Based on data provided by Bloomberg, if the merger is successful, it will be Ericsson's largest-ever purchase, following its 1.2 billion pound ($1.6 billion) takeover of Telent Ltd telecom equipment holdings in 2005.

Ericsson's stock dropped as much as 4.2% in early Monday trading.

In a statement released Monday, the Swedish telecommunications giant said it would pay $21 per share for Vonage with cash on hand. he offer represents an enterprise value of roughly $6.2 billion enterprise value.

The Vonage Board of Directors unanimously accepted the merger arrangement, Ericsson said.

"The deal furthers Ericsson's declared ambition to develop globally in wireless enterprise, providing existing clients with a larger share of a $700 billion market by 2030," Ericsson said.

Vonage had $1.4 billion in revenue in the 12-month period ending September 30, 2021, with a 14% adjusted profits before interest, taxes, and depreciation margin and $109 million in free cash flow.

After a period since Borje Ekholm took over as CEO in 2017, the acquisition ushers in a new era.

The deal is projected to generate near-term revenue synergies, such as white-labelling and cross-selling of the combined product portfolio, which is expected to generate $0.4 billion in revenue by 2025.

Following the completion of the purchase, Ericsson expects to generate some cost savings.

Ericsson's foray into cloud-based services comes as the company's profitability have been affected by a combination of lost business in China and component shortages caused by a worldwide supply-chain crunch.

On Monday, the business stated that it remains dedicated to its long-term EBITDA margin target of 15-18%.

"Vonage provides us with a platform to assist our clients monetize their network investments, which benefits developers and companies," Ericsson CEO Borje Ekholm.

Vonage will become a wholly owned subsidiary of Ericsson upon completion and will continue to operate under its current brand. Ericsson said it will be treated as a separate division in its accounts.