The deal brings together Sonus' software-based products for real-time communication virtualization, cloud-based SIP and VoLTE with Genband's network modernization, unified communications, and mobility and embedded communications equipment. Together they expect to benefit from increased scale and a wider offering for operators transitioning to IP and cloud-based networks.
The two companies' combined 2016 revenue and EBITDA would have been approximately USD 680 million and USD 50 million. They anticipate annual cost synergies of USD 40-50 million by the end of 2018 and positive operating cash flow in the first year after closing. Following the full impact of expected synergies, the combined company is expected to generate at least USD 100 million in annual EBITDA and target EBITDA of USD 140 million by 2020.
Under the terms of the agreement, Sonus and Genband will combine under a newly formed holding company. Each Sonus shareholder will receive one share of common stock in the combined company for each existing share owned. The combined company will issue 50 million shares of common stock to Genband's equity owners as well as USD 22.5 million in the form of an unsecured note. Upon closing of the transaction, Sonus and Genband shareholders are each expected to own 50 percent of the new company, while Genband will have five members of the board and Sonus four.
The new group should have a net cash position of USD 40-45 million when the merger closes in the second half of 2017. The deal remains subject to shareholder and regulatory approval.
Sonus CEO Raymond Dolan will lead the new group, while Genband CEO David Walsh will oversee the Kandy business, Geband's cloud communications platform as a service, and assist with the integration of the businesses. Genband’s CFO Daryl Raiford will continue in the same role at the new company, and Sonus chairman and former Verizon CTO Richard Lynch will serve as chairman.
