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9 April 2015

Infinera makes $350m offer to acquire Transmode

Infinera Corp of Sunnyvale, CA, USA, a vertically integrated manufacturer of digital optical transport networking systems incorporating its own indium phosphide-based photonic integrated circuits (PICs), has made a recommended public offer to shareholders to acquire Transmode AB of Stockholm, Sweden (a provider of packet-optical networking solutions). The acceptance period of the offer is expected to run from 26 June to 17 July.

For every 10 shares of Transmode (listed on Nasdaq Stockholm, Mid Cap, as 'TRMO'), shareholders will receive SEK300 in cash and 4.705 Infinera shares. The purchase price implies a price per share of about SEK109, and a total equity value for Transmode of about SEK3020m ($350m). Infinera will deliver about $96m in cash (funded from its balance sheet) and will issue about 13 million new Infinera shares (about 10.1% of its shares outstanding) to Transmode shareholders. As of 27 December, Infinera's total cash holdings were about $391m. Post-transaction, Transmode shareholders would hold 9.2% of Infinera's outstanding shares and voting power in the combined company (and 8.7% of the combined company on a fully diluted basis).

As of 27 December, Infinera had cash, cash equivalents, investments and restricted cash of $391m and carried $150m in convertible debt. Cash flow from operations in 2014 was $36m. Infinera can hence finance the cash portion of the offer through its existing cash resources, without any financing conditions.

The acquisition has been approved by the board of directors of Infinera. Also, Transmode's board of directors has unanimously recommended that its shareholders accept the offer. Largest shareholder Pod Investment AB (which holds about 33% of total shares and voting rights) has undertaken to accept the offer (subject to customary conditions).

Complementing Infinera's strength in the long-haul optical transport market and its early lead in the metro Cloud market, Transmode's suite of metro core, edge and access solutions should allow Infinera to address the entire end-to-end WDM market and to capitalize on the transition of major 100G metro aggregation deployments expected by industry analysts to commence in 2016. Infinera says that Transmode's products provide a rich set of application-specific features including broadband aggregation, mobile backhaul and fronthaul along with business Ethernet MEF certifications. Both firms bring complementary customers and technology, with Transmode positioned primarily in metro applications in Europe and Infinera historically positioned in long-haul and metro cloud, particularly in North America.

"The acquisition of Transmode accelerates the realization of our long-held vision of providing an end-to-end portfolio of world-class optical transport products. Further, the combination ensures we are well positioned to be a leading provider in the metro aggregation market as this market transitions to 100G," says Infinera's CEO Tom Fallon. "Transmode's services-rich metro platforms, broad European customer base and profitable business model are naturally complementary to Infinera," he adds. 

"Drawing on the complementary and synergistic skill sets of Infinera and Transmode, the combined company will be able to compete more effectively, develop differentiated and advanced products, and provide greater value to its most important stakeholders," believes Transmode's CEO Karl Thedéen.

The offer is expected to close in third-quarter 2015 (on or around 29 July), subject to certain closing conditions, including acceptance by more than 90% of the total number of shares of Transmode. The transaction is expected to be neutral to slightly dilutive to Infinera's non-GAAP earnings in second-half 2015, and accretive to non-GAAP earnings in 2016.

For the near-term, Infinera does not intend to make any material changes to Transmode's staffing or to its existing organization and operations, including the terms of employment and locations of the business. Each firm's engineering structure is expected to remain substantively intact, and Infinera intends Transmode's current CEO to lead metro aggregation business operations. Long term, the optimal structures of each function will be determined following completion of the offer.

See related items:

Infinera named fastest-growing optical company in North America and EMEA combined

Tags: Infinera InP PICs

Visit: www.infinera.com

Visit: www.transmode.com

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