Adtran sought to strengthen its position in the fiber market, striking a €789 million (approximately $931 million) deal to acquire Germany-based vendor ADVA Optical Networking.
On a call with investors, Adtran Chairman and CEO Thomas Stanton said the deal will “significantly increase the scale of the combined businesses, enhancing our ability to serve as a trusted supplier to customers worldwide while broadening our product offerings.”
Specifically, he noted the tie-up will allow Adtran, which already has expertise in fiber access, extension and subscriber connectivity, to tap into ADVA’s portfolio of metro wavelength division multiplexing (WDM), data center interconnect, business ethernet and network synchronization products.
“Together we will have a comprehensive end-to-end offering that will allow us to better capitalize on the ongoing global fiber investment opportunity,” Stanton said, adding the pandemic has “clearly shown that fiber connectivity has become an essential foundation for the modern digital economy.”
“Combining Adtran and ADVA’s software platforms with a broader networking portfolio, the combined company will be able to deliver more advanced software applications that simplify the operation of these networks while providing superior customer experience,” he continued.
All told, the Adtran is chasing what it views as a $7.1 billion addressable market opportunity.
Dell’Oro Group VP of broadband access and home networking Jeff Heynen recently noted Adtran is one of the top vendors in the multi-gig passive optical networking (PON) market.
Asked to comment on the deal, he told Fierce “As 10G PON deployments continue to ramp, the typical aggregation links of those OLTs [optical line terminals] are going to also increase from point-to-point 10G to 25G, 40G and 100G, depending on the density of the OLT. That is going to require new aggregation platforms in the metro and edge portion of the networks. So, the combined Adtran and ADVA can address both the subscriber-facing access portion of the network, as well as the aggregation of those upgraded OLT platforms.”
Heynen added "this is an ideal combination for the tier 2 and tier 3 markets, where combined RFPs for access and aggregation are likely to occur."
Fellow Dell'Oro VP Jimmy Yu also noted the deal "will give Adtran a stronger good presence in Europe. And on the other side, ADVA via Adtran will have a stronger presence in North America, especially related to any RDOF spending that is marked for buying from local suppliers such as Adtran."
The combined company will be known as Adtran Holdings, with Stanton retaining his positions as CEO and chairman. ADVA CEO Brian Protive will become Executive Vice Chairman. Adtran CFO Mike Foliano and ADVA CTO Christoph Glingener will serve in the same roles for the combined company. A new board of directors will be composed of six members designated by Adtran and three from ADVA.
After close, the combined company is expected to deliver revenue of approximately $1.2 billion and reap $52 million in annual run-rate cost synergies.
Slides shared by management on the call showed Adtran’s revenue totaled $534 million for the 12 months ending June 30, 2021, while ADVA’s came in at $693 million. Approximately 74% of Adtran’s revenue came from the Americas, with 62% of ADVA’s flowing from Europe, the Middle East and Africa (EMEA). Access and aggregation dominated Adtran’s revenue mix (61%), while cloud interconnect/metro WDM accounted for the vast majority (70%) of ADVA’s sales.
Once the deal wraps, Adtran shareholders will own approximately 54% of the company’s stock, with ADVA investors holding the remaining 46%. The transaction is expected to close sometime in Q2 or Q3 of 2022.
This story has been updated with additional comments from Dell'Oro Group.