(Bloomberg) -- Ribbon Communications Inc., a developer of software for large phone companies, has agreed to acquire closely held ECI Telecom Ltd. for $460 million.
Ribbon will pay $324 million in cash and 32.5 million shares of Ribbon common stock for ECI, according to a statement Thursday, confirming a report in Bloomberg News. ECI shareholders will also receive $31 million from ECI’s sale of real estate assets.
Ribbon will finance the deal with about $500 million in debt, according to an investor presentation. The combined company will be worth an estimated $900 million, including debt, Ribbon said. The transaction is scheduled to close in the first quarter of 2020.
ECI’s private equity owner, Shaul Shani’s Swarth Group, is expected to own about 23% of Ribbon after the deal closes, Ribbon Chief Financial Officer Daryl Raiford said in an interview.
"The ECI acquisition will extend Ribbon’s reach into the networking market and propel us into the global 5G market," he said in a statement. "ECI brings world class networking technology and a proven track record of success in winning top customers in direct competition with major industry players."
Ribbon’s shares fell 1.2% to $4.00 at 9:30 a.m. in New York trading Thursday, giving Westford, Massachusetts-based company a market value of about $443 million.
ECI, which makes equipment that helps transport data around the backbone of the internet, will diversify Ribbon’s offerings beyond its core telecommunication products. It will also expand the company into new territories including Russia and also deepen its reach in India.
Ribbon also announced Thursday that Franklin "Fritz" Hobbs has stepped down effective today as president and chief executive officer of the company. It has named Steven Bruny and Kevin Riley as interim co-presidents and co-CEOs while the company recruits a permanent replacement.
Ribbon changed its name from Sonus Networks Inc. in 2017 after merging with Genband, a company that had purchased assets from Nortel Networks in bankruptcy in 2010.
ECI scrapped an initial public offering on the London stock exchange this year. It competes with large networking equipment companies such as Ciena Corp., Nokia Oyj and Cisco Systems Inc., according to its IPO prospectus.
Barclays Plc advised ECI on the transaction while Tap Advisors and Citizen Financial Group Inc.’s capital markets division advised Ribbon.
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