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.
The transaction combines Sonus’ software-based position in real-time communication virtualisation, cloud-based session initiation protocol (SIP) and 4G/voice-over LTE solutions and security initiatives with GENBAND’s network modernisation, unified communications, and mobility and embedded communications solutions.
The combined company is expected to realize annual cost synergies of $40 million to $50 million by the end of 2018 and to drive solid cash flow from operations in the first year after closing. Following the full impact of expected annualized synergies, the combined company is expected to generate at least $100 million in annual EBITDA, with fiscal year 2020 EBITDA projected to be approximately $140 million.
Raymond Dolan, President and Chief Executive Officer of Sonus commented, “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.”
Mr. Dolan continued, “GENBAND has an outstanding reputation in the market with a talented team and products that are highly complementary to Sonus. We are excited to combine forces to provide enhanced reliability, performance and functionality for customers’ real-time communications needs.”
David Walsh, Chief Executive Officer and Chairman of GENBAND, said, “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. 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.”
The Chief Executive Officer of the combined company will be Mr. Dolan. Mr. Walsh will oversee the Kandy business, a division of the combined company and currently GENBAND’s cloud communications platform as a service (CPaaS) for global service providers and enterprises. Mr. Walsh will also assist with the integration of the businesses. Daryl Raiford, Chief Financial Officer of GENBAND, will serve as Chief Financial Officer of the combined company. The remainder of the leadership team will be named from the current leadership of both companies, and will be announced prior to closing.