Ribbon Communications announced on Thursday that it's merging with ECI Telecom Group, and that CEO Franklin (Fritz) W. Hobbs has departed the company.
Ribbon's board of directors appointed Steven Bruny, executive vice president, global sales and services, and Kevin Riley, executive vice president and chief technology officer, as interim co-presidents and CEOs.
Two years ago, Ribbon announced Hobbs as its new president and CEO about a month after Sonus merged with Genband to form Ribbon Communications.
“Fritz has served our company well over the last two years. He stepped up when we needed to integrate Sonus and Genband, very successfully completing the integration in all respects, delivering more than all of the planned synergies and dramatically improving the company’s profitability,” said Dick Lynch, chairman of the board for Ribbon. “Additionally, he has been focused on strategic opportunities, culminating in the transformational merger with ECI Telecom Group Ltd that we announced today. The board thanks Fritz for his successes on behalf of Ribbon.”
Ribbon is kicking in 32.5 million shares of its common stock and $324 million in cash in its deal to buy ECI Telecom Group. ECI stockholders also stand to gain approximately $31 million from the sale of ECI's real estate assets. ECI's shareholders are expected to own 23% of the combined company on a fully-diluted bases.
The deal, which is subject to approval by Ribbon's stockholders, as well as gaining the customarily closing and regulatory approvals, is set to close in the first quarter of next year.
Privately-held ECI was founded in 1961, and has approximately 1,700 employees. Its headquarters are in Petah Tikva, Israel, and it serves more than 3,000 global customers. ECI provides optical transport, software-defined networking (SDN) and network functions virtualization (NFV) solutions for service providers, enterprises and data center operators.
Ribbon Communications sees its merger with ECI as a means to broaden its reach beyond its current voice applications to support data applications and optical networking. The combined companies also see 5G as a growth opportunity going forward since operators will need to make additional investments in the networking layer that ECI serves.
The combined company will target North America and Japan by using Ribbon's global sales force. It will also expand Ribbon's relationship with mobile operators, enabling the combined company to more broadly position its big data analytics solutions with ECI's packet networking and optical transport solutions.
Ribbon said the merger would expand its total addressable market (TAM) from $3 billion to $39 billion, as ECI's TAM is projected to reach $36 billion by 2022.
“With ECI’s solid position and long history in the packet-optical transport markets, this acquisition makes sense for Ribbon on multiple fronts, giving Ribbon an entry into the early and growing 5G-XHaul transport market while providing its combined customers with a full stack of solutions,” said Ovum's Don Frey, principal analyst transport and routing, in a statement. “In addition to cross-selling opportunities, this proposed acquisition will give Ribbon a broad product line and enhance scale as a communications solutions vendor to service providers and enterprises.”