Ribbon Communications announced an agreement to acquire ECI Telecom, expanding its portfolio with packet-optical transport and SDN/NFV equipment. The company will pay 32.5 million shares of Ribbon common stock and USD 324 million of cash, and ECI stockholders will also receive USD 31 million from ECI’s property sale.
The merged group will have combined annual revenue of over USD 900 million, 4,000 employees and customers in over 140 countries. Ribbon expects the combination to position the company for growth and to enhance its competitive strengths by expanding its product portfolio beyond equipment primarily supporting voice applications to include data applications and optical networking.
Revenue synergies are expected from the expansion of Ribbon’s addressable markets and sales of ECI’s products in Ribbon’s markets, with an emphasis on North America and Japan. Furthermore, the services associated with 5G are expected to drive a substantial increase in network demand and will likely require additional investment in the networking layer, where ECI is already a leading vendor.
Under the terms of the merger agreement, ECI stockholders are expected to own 23 percent of the combined company. Ribbon will finance the cash element of the takeover price with through cash on hand and committed debt financing consisting of a new USD 400 million term loan facility and new USD 100 million revolving credit facility, which is projected to be undrawn at close. The new facilities will retire Ribbon’s existing credit facility.
The deal remains subject to the approval of Ribbon’s stockholders and regulatory authorities and is expected to close in the first quarter of 2020. Ribbon’s corporate headquarters is expected to remain in Westford, Massachusetts.
Ribbon was formed in 2017 from the merger of Genband and Sonus Networks. Franklin Hobbs, its CEO appointed at the time, has resigned with immediate effect after completing the negotiations on the ECI deal. Steven Bruny, Executive Vice President for Global Sales and Services, and CTO Kevin Riley will serve as interim co-Presidents and CEOs while Ribbon searches for a new CEO.
