Infinera, has announced its offer to acquire Transmode, a provider of metro packet-optical networking through a recommended public offer to the shareholders of Transmode (the “Offer”). Transmode is headquartered in Stockholm, Sweden, and listed on Nasdaq Stockholm (TRMO).
The Board of Directors of Transmode has unanimously recommended to Transmode’s shareholders to accept the Offer. Pod Investment AB, the largest shareholder, which holds approximately 33 percent of the total shares and voting rights in Transmode, has undertaken to accept the Offer subject to customary conditions.
Complementing Infinera’s strength in the long-haul optical transport market and its early lead in the metro Cloud market, Transmode’s suite of metro core, edge and access solutions will allow Infinera to address the entire end-to-end WDM market and to capitalize on the transition of major 100G metro aggregation deployments expected by industry analysts to commence in 2016.
Transmode’s products provide a rich set of application specific features including broadband aggregation, mobile backhaul and fronthaul along with business Ethernet MEF certifications. Both companies bring complementary customers and technology with Transmode positioned primarily in metro applications in Europe and Infinera historically positioned in long-haul and metro cloud, particularly in North America.
“The acquisition of Transmode accelerates the realization of our long held vision of providing an end-to-end portfolio of world class optical transport products. Further, the combination ensures we are well positioned to be a leading provider in the metro aggregation market as this market transitions to 100G,” said Tom Fallon, CEO of Infinera. “Transmode’s services-rich metro platforms, broad European customer base and profitable business model are naturally complementary to Infinera. We are also excited to have the Transmode team join Infinera and leverage our shared cultures of customer first, product excellence and profitability.”
“Drawing on the complementary and synergistic skill sets of Infinera and Transmode, the combined company will be able to compete more effectively, develop differentiated and advanced products, and provide greater value to its most important stakeholders – customers, investors and employees,” said Karl Thedéen, CEO of Transmode.
Under the terms of the Offer, for every 10 shares of Transmode, shareholders will receive SEK 300 in cash and 4.705 Infinera shares. The purchase price implies a price per share of approximately SEK 109, and a total equity value for Transmode of approximately $350 million. In aggregate, Infinera will deliver approximately $96 million in cash, funded from its balance sheet, and will issue approximately 13.0 million new Infinera shares to Transmode shareholders.
As of December 27, 2014, Infinera’s total cash holdings were approximately $391 million. Post-transaction, Transmode shareholders will own 8.7 percent of the combined company on a fully diluted basis. The acquisition has been approved by the board of directors of Infinera, and unanimously recommended by the board of directors of Transmode.
The Offer is expected to close in the third quarter of Infinera’s fiscal year 2015, subject to certain closing conditions, including acceptance by more than 90 percent of the total number of shares of Transmode and other customary conditions. The transaction is expected to be neutral to slightly dilutive to Infinera’s non-GAAP earnings in the second half of 2015, and accretive to Infinera’s non-GAAP earnings in 2016.
Morgan Stanley & Co. LLC is acting as exclusive financial adviser to Infinera, along with Mannheimer Swartling and Wilson Sonsini Goodrich & Rosati, P.C., who are serving as legal advisers. Lazard is acting as financial adviser to Transmode, along with Hannes Snellman, who serves as legal adviser.