Ribbon Communications is acquiring ECI Telecom Group, an Israeli global provider of elastic network solutions to service providers, critical industries and data center operators, for 32.5 million shares of Ribbon common stock and $324 million in cash.
At the same time, Franklin Hobbs, Ribbon’s president and CEO, has left the company. Steven Bruny, executive vice president of global sales and services, and Kevin Riley, executive vice president and CTO, have been appointed interim co-presidents and CEOs pending the search for a new CEO.
When the acquisition is completed, the two companies will create a “powerful, leading edge” solutions provider with anticipated combined annual revenue of more than $900 million and serving customers in more than 140 countries, Ribbon said. The acquisition is anticipated to close in the first quarter of 2020.
Patrick Joggerst, Ribbon‘s chief marketing officer, tells Channel Partners “we are excited to make this one plus one equals three for our channel partners.”
“The merger will enable us to provide our partners with a broader solutions portfolio from a larger scale and trusted vendor,” he said. “At this point, it is too early to discuss details about integrating the two companies’ partner ecosystems, but we will have more information to share following the close of the transaction.”
Ribbon expects the combination to position the company for growth and enhance its competitive strengths by expanding its product portfolio beyond solutions primarily supporting voice applications to include data applications and optical networking.
John McCready, Ribbon’s executive vice president and chief strategy officer, said that, in addition to “significantly expanding our core total addressable market (TAM), the proposed combination brings together two very complementary companies, a rare feat.”
“ECI Telecom Group is an established company that has experienced strong growth over the last five years and whose technology is directly adjacent to ours,” he said. “We see symbiotic long-term growth potential — the more customers that move to the cloud, which is where Ribbon’s focus has been to this day, the more we believe they will require the optical transport solutions ECI provides.”
ECI’s area of expertise in optical networking has “seen decades of significant growth,” which is expected to continue as 5G deployments become a reality, “opening up new opportunities for our combined companies to serve our customers around the world with best-in-class solutions that leverage our advanced analytics, security, monetization and cloud capabilities,” McCready said.
The acquisition will broaden carrier relationships in Europe and Asia, and add customers in critical infrastructures, utilities, defense and homeland security sectors, according to Ribbon.
“Both companies enjoy a distinguished operating history and are trusted suppliers to the world’s leading telecommunication service providers and enterprises,” said Darryl Edwards, ECI’s president and CEO. “We aim to create a powerhouse company that offers world-class products for an enhanced customer experience, benefiting our combined global customer base.”
Don Frey, Ovum’s principal analyst of transport and routing, said with ECI’s “solid position and long history” in the packet-optical transport markets, this acquisition makes sense for Ribbon on multiple fronts, giving the company an entry into the early and growing 5G xHaul transport market while providing its combined customers with a full stack of solutions.
“In addition to cross-selling opportunities, this proposed acquisition will give Ribbon a broad product line and enhance scale as a communications solutions vendor to service providers and enterprises,” he said.