Infinera, provider of Intelligent Transport Networks, announced its intent to acquire Coriant, a privately held global supplier of open, hyperscale network solutions.

The acquisition significantly scales the company as the next wave of global network spending begins, creating one of the world’s largest optical network equipment providers. The combination positions Infinera to capitalize on the next wave of global network spending as network operators transform their networks to transition from 4G to 5G, from Optical Transport Network (OTN) to packet and from closed to open network architectures. Infinera’s vertically integrated business model provides the unique ability to unleash value for customers and investors as the company’s combined network solutions power the world’s largest network operators. Ovum forecasts optical network spending to reach $17.8 billion in 2022.

“Acquiring Coriant is a fantastic opportunity, strengthening our ability to serve the world’s largest network operators, accelerating our ability to leverage vertical integration and reinforcing our commitment to our long-term business model,” said Tom Fallon, Infinera CEO. “This powerful combination immediately benefits our combined customers by delivering the innovative technology required for the next wave of network spending.”

“Joining forces with Infinera accelerates our vision of transforming next-generation networks with best-in-class innovation,” said Pat DiPietro, CEO and Vice Chairman of Coriant. “The combined company will benefit from Coriant’s significant investments in software automation and open, disaggregated solutions, which have gained significant traction and wide-scale adoption by customers around the world.”

Strategic and Financial Rationale

  • Compelling strategic logic: The scale economics of Infinera’s vertically integrated business model deliver higher performance at lower cost for our customers and higher profit margins for our stockholders. The acquisition approximately doubles Infinera’s revenue and expands the company’s customer base to serve nine of the top 10 global network operators (five new to Infinera) and the top six global internet content providers (three new to Infinera).
  • Financially attractive: The acquisition is expected to be substantially accretive in 2019. This accretion will come from $100 million of identified cost savings in both cost of goods sold and operating expenses. Total cost synergies of $250 million are expected through 2021, with the continuation of operating synergies and the introduction of vertical integration into the Coriant product line, resulting in a step-function increase in Coriant’s margins. Infinera will be acquiring a debt-free balance sheet and expects cash flows to pay back transaction consideration within three years.
  • Innovation to benefit customer networks: Coriant invested nearly $1 billion in research and development over the last five years to significantly advance its portfolio to address the growing demand for software automation and open, disaggregated platforms. Infinera recently upgraded its portfolio based on the innovative Infinite Capacity Engine (ICE4). Combining the strengths of both companies creates a powerful new portfolio to support our customers’ transition from 4G to 5G, from OTN to packet and from closed to open network architectures.