Ribbon Communications to Merge with ECI Telecom
Thursday, November 14, 2019 | Comments

Ribbon Communications announced that it entered into an agreement to acquire, through a merger, ECI Telecom Group (ECI) for 32.5 million shares of Ribbon common stock and $324 million in cash. ECI stockholders will also receive approximately $31 million from ECI's sale of real estate assets.

With this transformational transaction, Ribbon and ECI will create a solutions provider with anticipated combined annual revenue of more than $900 million, customers in more than 140 countries and 4,000 employees worldwide. Ribbon expects the combination to position the company for growth and to enhance its competitive strengths by expanding its product portfolio beyond solutions primarily supporting voice applications to include data applications and optical networking.

"The ECI acquisition will extend Ribbon's reach into the networking market and propel us into the global 5G market," said Daryl Raiford, Ribbon chief financial officer (CFO). "ECI brings world class networking technology and a proven track record of success in winning top customers in direct competition with major industry players. Ribbon has long-standing, deep customer relationships in North America and Japan, which will provide immediate access to ECI solutions into these substantial markets. We believe this combination will create new revenue opportunities to drive growth, provide our customers and partners with a broader solutions portfolio, and generate significant long-term value for our stockholders."

The combined company expects to realize revenue synergies from the expansion of Ribbon's addressable markets and sales of ECI's products in Ribbon's markets, with an emphasis on North America and Japan. Furthermore, the combined company will be well positioned to serve the high-growth 5G market. The services associated with 5G are expected to drive a substantial increase in network demand and will likely require additional investment in the networking layer, where ECI is already a leading vendor.

"We are excited to join forces with Ribbon, bringing together Ribbon's and ECI's rich portfolios of communications solutions,” said Darryl Edwards, ECI president and chief executive officer (CEO). “Both companies enjoy a distinguished operating history and are trusted suppliers to the world's leading telecommunication service providers and enterprises. We aim to create a powerhouse company that offers world-class products for an enhanced customer experience, benefiting our combined global customer base."

Under the terms of the merger agreement, Ribbon will acquire all outstanding equity of ECI. Ribbon will issue 32.5 million shares of its common stock to ECI stockholders and provide $324 million of net cash consideration. ECI stockholders are expected to own approximately 23 percent of the combined company on a fully diluted basis. Cash consideration is expected to be financed through cash on hand and committed debt financing consisting of a new $400 million term loan facility and new $100 million revolving credit facility, which is projected to be undrawn at close. The new facilities will retire Ribbon's existing credit facility.

Additionally, ECI stockholders will also receive approximately $31 million from ECI's sale of real estate assets. The proposed transaction has been unanimously approved by Ribbon's board of directors and is subject to the approval of Ribbon's stockholders, regulatory approvals and customary closing conditions. Ribbon anticipates the acquisition will close in the first quarter of 2020. Ribbon's corporate headquarters is expected to remain in Westford, Massachusetts.

The proposed transaction is expected to:
• Create a larger U.S.-based global solutions provider and strengthen the company's position in the converged telecom/data communications market.
• Align with Ribbon's strategic direction to expand its ecosystem, penetrate new adjacent markets and position the company for sustained growth.
• Position Ribbon to leverage its global salesforce to cross-sell ECI's products to key geographies, such as North America and Japan.
• Enable Ribbon's entry into the rapidly growing 5G networking market with ECI's market-ready solutions.
• Expand Ribbon's relationships with mobile service providers, enabling the company to more broadly position its big data analytics solutions with ECI's packet networking and optical transport solutions.
• Provide the combined company's customers and partners with a broader solutions portfolio from a larger scale and trusted vendor.
• Broaden carrier relationships in Europe and Asia and add customers in critical infrastructures, utilities, defense and homeland security sectors.

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