Infinera plans to buy Coriant for up to $230mn to double revenue and expand customer base

Infinera, provider of Intelligent Transport Networks, reportedly intends to acquire Coriant, a privately-held global supplier of open, hyperscale network solutions for a price that could reach US$230 million (€196.42 million).

The acquisition significantly scales the company as the next wave of global network spending begins, creating one of the world’s largest optical network equipment providers. The combination positions Infinera to capitalise on the next wave of global network spending as network operators transform their networks to transition from 4G to 5G, from Optical Transport Network (OTN) to packet and from closed to open network architectures.

Infinera’s vertically integrated business model provides the unique ability to unleash value for customers and investors as the company’s combined network solutions power the world’s largest network operators. Ovum forecasts optical network spending to reach $17.8 billion (€15.20 billion) in 2022.

“Acquiring Coriant is a fantastic opportunity, strengthening our ability to serve the world’s largest network operators, accelerating our ability to leverage vertical integration and reinforcing our commitment to our long-term business model,” said Tom Fallon, Infinera CEO. “This powerful combination immediately benefits our combined customers by delivering the innovative technology required for the next wave of network spending.”

Pat DiPietro

“Joining forces with Infinera accelerates our vision of transforming next-generation networks with best-in-class innovation,” said Pat DiPietro, CEO and vice chairman of Coriant. “The combined company will benefit from Coriant’s significant investments in software automation and open, disaggregated solutions, which have gained significant traction and wide-scale adoption by customers around the world.”

Strategic and financial rationale:

    • Compelling strategic logic: The scale economics of Infinera’s vertically integrated business model deliver higher performance at lower cost for our customers and higher profit margins for our stockholders. The acquisition approximately doubles Infinera’s revenue and expands the company’s customer base to serve nine of the top 10 global network operators (five new to Infinera) and the top six global internet content providers (three new to Infinera).
    • Financially attractive: The acquisition is expected to be substantially accretive in 2019. This accretion will come from $100 million (€85.40 million) of identified cost savings in both cost of goods sold and operating expenses. Total cost synergies of $250 million (€213.50 million) are expected through 2021, with the continuation of operating synergies and the introduction of vertical integration into the Coriant product line, resulting in a step-function increase in Coriant’s margins. Infinera will be acquiring a debt-free balance sheet and expects cash flows to pay back transaction consideration within three years.
    • Innovation to benefit customer networks: Coriant invested nearly $1 billion (€0.85 billion) in research and development over the last five years to significantly advance its portfolio to address the growing demand for software automation and open, disaggregated platforms. Infinera recently upgraded its portfolio based on the innovative Infinite Capacity Engine (ICE4). Combining the strengths of both companies creates a powerful new portfolio to support our customers’ transition from 4G to 5G, from OTN to packet and from closed to open network architectures.

Transaction Details

Tom Fallon

Under the terms of the definitive purchase agreement governing the acquisition, subject to customary adjustments, Infinera will pay approximately $150 million (€128.10 million) in cash at closing, and estimated additional amounts of $25 million in the two quarters post-closing and $55 million (€46.97 million) over a period of years.

Infinera will issue approximately 21 million shares, which when combined with the cash consideration, results in total transaction consideration of approximately $430 million (€367.23 million). Confident in the combined company’s opportunities, Coriant’s majority owner, Oaktree Capital Management (“Oaktree”), expressed an interest in being compensated for this transaction largely in stock.

Post-transaction, Oaktree will own approximately 12% of the combined company on a fully diluted basis. Pursuant to the terms of the definitive purchase agreement, Oaktree has agreed to lock up 50% of its shares for six months post-close and the remaining 50% of its shares for 12 months post-close.

To fund the cash requirements of this transaction, and to support future working capital requirements, Infinera plans to pursue debt financing. Morgan Stanley Senior Funding, Inc. has committed to provide debt financing for the transaction, subject to customary conditions.

The acquisition is expected to close in the third quarter of 2018, subject to customary closing conditions. The board of directors of Infinera has unanimously approved the transaction.

Comment on this article below or via Twitter: @VanillaPlus OR @jcvplus

RECENT ARTICLES

Connectbase expands baltic connectivity with Bitė partnership

Posted on: March 28, 2024

Connectbase has announced the addition of Bitė to its ecosystem. This partnership marks a step forward in enhancing connectivity options within the Baltic region, providing a link between local and

Read more

IOT Solutions World Congress 2024 connects semiconductor chips to industry

Posted on: March 27, 2024

Essential to manufacture computers, smartphones, cars, refrigerators or any electronic device, semiconductors are critical elements in the implementation of the Internet of Things. For this reason, IOT Solutions World Congress

Read more