Infinera has announced its intent to acquire hyperscale network solution provider, Coriant in a move designed to scale the company as the next wave of global network spending begins.
Citing forecasts from Ovum, which predict that optical network spending will reach $17.8 billion in 2022, Infinera says that it plans to capitalise 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. The company’s vertically integrated business model allows the new combined network to ‘unleash value’ for customers and investors.
Under the terms of the definitive purchase agreement, subject to customary adjustments, Infinera will pay approximately $150 million in cash at closing, with estimated additional amounts of $25 million in the two quarters post-closing and $55 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. Coriant’s majority owner, Oaktree Capital Management, expressed an interest in being compensated for this transaction largely in stock. Post-transaction, Oaktree will own approximately 12 per cent of the combined company on a fully diluted basis. It has agreed to lock up 50 per cent of its shares for six months post-close and the remaining 50 per cent 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.
Tom Fallon, Infinera CEO commented on the announcement: ‘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. This powerful combination immediately benefits our combined customers by delivering the innovative technology required for the next wave of network spending.’
Added Pat DiPietro, CEO and vice chairman of Coriant: ‘Joining forces with Infinera accelerates our vision of transforming next-generation networks with best-in-class innovation. 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.’
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.