Partnerships, mergers, and acquisitions have a profound impact on an organization’s growth. Although these strategic alliances are the norm in business, it’s not every day that two key players in the cloud communication space decide to join forces.
Global cloud and real-time communications leader Sonus Networks, Inc. (NASDAQ: SONS; $7.79) and GENBAND, a leading provider of carrier and enterprise network and real-time communications solutions, has recently announced their intentions of merging. Under the agreement, the two software-based voice vendors will team up to create a real-time next-generation communications solutions with increased sales and market reach across products, customers, and geographies.
“Sonus and GENBAND shareholders will each own approximately 50% of the combined company. Based on the closing price of Sonus’ common stock on May 22, 2017 of $7.79 and estimated net cash at the time of closing, the transaction values the combined company at an enterprise value of approximately $745 million,” according to a press release by the provider.
Sonus + GENBAND Merger: A Win-Win Deal for Both Companies
Sonus Networks specializes in cloud-based session initiation protocol (SIP), 4G/VoLTE related software, and real-time communication virtualization solutions. GENBAND’s expertise lies on network modernization, unified communications, and mobility and embedded communications solutions.
By merging Sonus’ and GENBAND’s communications portfolios, both companies can deliver more efficient and effective research and development (R&D) and a comprehensive, real-time cloud-based solutions that help meet the growing needs of customers across the world.
“GENBAND has an outstanding reputation in the market with a talented team and products that are highly complementary to Sonus,” said Raymond Dolan, the President and Chief Executive Officer of Sonus. “We are excited to combine forces to provide enhanced reliability, performance, and functionality for customers’ real-time communications needs.”
“Together, Sonus and GENBAND create a market leader in real-time communications with enhanced capabilities to support our customers’ move to cloud-based solutions,” added Dolan. “The transaction is expected to generate significant near- and long-term value for shareholders, who we believe will benefit from their ownership in a combined company with increased scale and resources to invest in and accelerate each company’s growth initiatives. This is a strategically and financially compelling transaction for Sonus and we are confident that together with GENBAND we will achieve our growth initiatives faster and more fully than either company could do on its own.”
David Walsh, the Chief Executive Officer and Chairman of GENBAND, shared how their merger with Sonus Networks can benefit their customer base.
“We are delighted to combine with Sonus at a time when the world’s largest service providers and enterprises accelerate the modernization and transformation of their networks,” said Walsh. “Like Sonus, GENBAND has transitioned its business to support this industry shift and we have seen improving profitability over the last couple of years and into 2017. With this combination, we believe our complementary product portfolios and expanded global footprint will allow us to even better respond to the evolving needs of customers. Our heritage and culture fit perfectly together and the combined talent going forward is second to none. This is truly an ideal combination.”
How Sonus + GENBAND Enhance Enterprise Communication and Drive Shareholder Value
Sonus’ and GENBAND’s complementary product portfolios can help enable network transformations to IP and cloud-based networks for service providers and enterprise customers. Through the merger, both companies can enhance the scale and geographic reach of their businesses while providing their customer base with a cutting-edge, real-time communications software solution that can drive business efficiency.
The following are the three strategic benefits that Sonus’ and GENBAND’s employees and customers can expect from the merger:
- Enhanced communications product offerings. The partnership brings together two complementary businesses that offer innovative, cloud-based communications solutions for service providers and their end-user customers. “Together, we will have greater resources across the globe to support our customers’ needs, through a broader and deeper footprint, increased ability to invest in growth, more efficient and effective R&D, and smoother migration paths to the virtualized all-IP world,” said Patrick Joggerst, GENBAND’s Executive Vice President for Global Sales and Marketing.
- Complementary growth initiatives. Sonus and GENBAND both have established growth initiatives that complement each other. GENBAND’s Kandy initiatives allow service providers and end-user customers to embed video, voice, messaging, presence, and more. Sonus’ new cloud security and analytics platform that enables network-wide threat detection, mitigation, and flow control. By combining these growth initiatives, both companies can help create the path for customers and partners to easily and securely launch new real-time communications offerings.
- Expanded footprint in 27 countries. The newly formed company will enable Sonus and GENBAND to have a global presence that will help every major Tier-1 communications service providers easily reach or avail themselves of innovative, real-time cloud communications offerings. “The combination sensibly brings together two complementary businesses and world-class teams that will be well positioned to offer even more value to our customers and partners when it comes to quickly and securely launching new real-time communications offerings," Joggerst said.
Further Details About the Merger
Under the agreement, GENBAND and Sonus will combine and create a newly formed holding company. Sonus’ and GENBAND’s combined company will issue an estimated amount of 50 million shares of common stock to GENBAND’s equity owners and $22.5 million of consideration in the form of an unsecured note. Each shareholder from Sonus will also receive one share of common stock in the newly formed company for every existing Sonus share they own. Once the transaction is closed, the two companies’ shareholders will each own approximately 50 percent of the newly formed holding company on a fully-diluted basis. The newly formed holding company will have an estimated net cash position of $40 million to $45 million at the time of close. This amount is expected to increase in fiscal 2018 as the company realizes synergies.
Sonus + GENBAND merger is expected to close in the second half of 2017. Although the transaction has been unanimously approved by the Boards of Directors of Sonus and GENBAND, it is still subject to shareholder approval, the listing of the combined company’s common stock on Nasdaq, Hart-Scott-Rodino review, and other customary closing conditions. Raymond Dolan of Sonus will serve as the Chief Executive Officer for the newly formed company while GENBAND’s David Walsh will oversee the Kandy initiative.
Sonus Networks, Inc., a global leader in cloud and real-time communications software solutions, enables and secures mission-critical traffic for video, Voice over Internet Protocol (VoIP), instant messaging, and online collaboration. Founded in 1997, the company has been providing diameter signaling controllers (DSCs), hardware-based and virtualized session border controllers (SBCs), policy/routing servers, media and signaling gateways, network intelligence applications, and network analytics tools in more than 100 countries.
GENBAND’s real-time communications solutions help organizations have innovative and cost-efficient alternatives to proprietary private branch eXchange (PBX) and unified communications (UC) products. Headquartered in Plano, Texas with operations, R&D, and resources across the world, GENBAND delivers world-class support and services to more than 700 customers in over 80 countries. The company’s comprehensive network and communications portfolio include the award-winning Kandy communications platform as a Service (PaaS), session border controllers (SBCs), application server, call controllers, media gateways, network virtualization, and more.