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Infinera accelerates metro strategy with $350M Transmode bid

Infinera has made an offer to acquire Transmode, a specialist in metro packet-optical networking, in a move that would accelerate its existing metro strategy. The deal, should it proceed, values the Swedish networking company at $350 million (€328 million).

Stockholm-based Transmode offers a range of metro core, edge and access products – a portfolio that is highly complementary to Infinera’s long-haul, core and metro cloud offerings. Infinera hopes that the acquisition will allow it to address the entire end-to-end WDM market which is estimated to be worth $15 billion in 2019, according to Infonetics.

“Infinera’s vision has always been to provide a comprehensive end-to-end solution, to enable our customers to run highly scalable, agile, and efficient networks. With Transmode, we have an opportunity to accelerate our offerings for the metro aggregation portion of the market, in order to maximise our share as this market transitions to 100-gig,” said Tom Fallon, CEO of Infinera on a conference call discussing the transaction.

Transmode's metro aggregation expertise will be of particular interest to Infinera as the vendor prepares to launch its own metro aggregation platform later this year. Transmode’s products provide a set of application-specific features including broadband aggregation, mobile backhaul and fronthaul along with business Ethernet MEF certification.

Fallon said that Infinera intends to put Transmode’s current CEO Karl Thedéen in charge of the metro business aggregation operations of the combined company.

Infinera has not given any details about the upcoming product launch, but at OFC 2015 in Los Angeles last month, the company announced two new photonic integrated circuits (PICs) on which the new metro aggregation platform will be based.

There may also be further opportunities for cross-pollination of technologies – with Infinera looking to integrate its new metro-optimised PICs into appropriate pieces of Transmode’s product line. “We intend to incorporate our leadership technologies, such as our photonic integrated circuit and SDN, wherever they are applicable, into Transmode’s product set,” said Fallon.

The offer is based on a mixture of cash and shares. Should it proceed, Infinera will pay Transmode approximately $96 million in cash, funded from its cash holdings of $391 million, and will issue about 13 million new Infinera shares. For every 10 shares of Transmode, shareholders will receive SEK 300 ($34.55) in cash and 4.705 Infinera shares. Post-transaction, Transmode shareholders then would own 8.7 per cent of the combined company.

Transmode’s board of directors has advised shareholders to accept the offer, which is expected to close in the third quarter of Infinera’s fiscal year 2015. It’s worth noting that Pod Investment AB, Transmode’s largest shareholder with 33 per cent of the total shares and voting rights, has already committed to accept the offer, subject to customary conditions.

In its statement, Transmode noted that the board had been in discussions with other industrial companies, but that the offer from Infinera was deemed to be “the best current option”.

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