There’s been a lot of chatter about potential consolidation in the optical sector. Infinera (Nasdaq: INFN) is getting the ball rolling by buying Swedish metro optical firm Transmode (ST: TRMO).
This morning Infinera announced that it had made an offer to buy Transmode in a deal that combines $96 million in cash plus a stock swap equivalent to 4.7 Infinera shares for every 10 shares of Transmode, valued at approximately $350 million. The Board of Directors of Transmode has unanimously accepted Infinera’s offer.
Today in European trading, Transmode shares, which trade on the Stockholm exchange, were up 15% on news of the deal, trading at 115 SEK (US$13). Infinera shares were trading up $1.07 (5.5%) to $20.50 in pre-market trading this morning.
Infinera says the two companies will combine complementary products for long-haul, metro, and cloud networking. Infinera has a leading position in 100G WDM networking, and Transmode has a leading postion in metro packet optical in the EMEA region.
The deal emphasizes the recent shift of the optical market into metro areas that are building out bandwidth to support “webscale” data centers shuttling bits of cloud applications and social networking content between servers.
Infinera expects the deal to be accretive — or adding to profitability — in 2016.
Transmode’s products are used for broadband aggregation, mobile backhaul and fronthaul, and business Ethernet services.
“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,” said Tom Fallon, CEO of Infinera, in a statement. “Further, the combination ensures we are well positioned to be a leading provider in the metro aggregation market as this market transitions to 100G.”