Transmode Unveils IPO

Swedish metro optical transport equipment vendor Transmode Systems AB is to IPO on the Nasdaq OMX Stockholm exchange on May 27, with the symbol TRMO, in a move that values the company at up to 1.536 billion Swedish kronor (US$241 million).

The company, which has its WDM products deployed in more than 300 networks globally, is to offer 7.61 million shares (28.3 percent of its total capital) at between SEK47 and SEK57, raising between SEK357.7 million and SEK433.8 million ($56.2 million and $68.1 million) for the existing shareholders that are selling their stock.

If there is sufficient demand, an additional "upsize" tranche of up to 3.45 million shares may be offered for sale, while up to 1.38 million extra shares may also be sold to cover any over-allotments. If both the upsize and over-allotment shares are all sold, a total of 12.45 million shares (46.2 percent of the company's total capital) will be traded.

Transmode, which was named as Top IPO/M&A Candidate in the 2008 Leading Lights Awards, is not selling any shares as part of the IPO and so will not bank any of the proceeds. (See LR Names 2008 Leading Lights Winners.)

The move follows a few years of steady if unspectacular progress that has seen the company grow its annual revenues to SEK699 million ($109.7 million) in 2010, a near 23 percent increase compared with 2009. And the company is profitable, as it reported net income of SEK81.4 million ($12.8 million) last year.

Table 1: Transmode Financials 2008-2010
In millions Swedish kronor 2008 2009 2010
Revenues 607.1 570.1 699.3
Adjusted operating margin 17.6% 11.3% 15.5%
Net profit after tax 77.3 44.3 81.4
Source: Transmode

That trend has continued into 2011, as Transmode generated revenues of SEK181.1 million ($28.4 million), and net income (before expenses related to the IPO) of SEK6.4 million ($1 million), during the first three months of 2011.

The company had raised more than $93 million from investors including Amadeus Capital Partners Ltd. , Harbour Vest Partners LLC and European Equity Partners . (See Transmode Lands Another $12M.)

Why this matters
The move provides extra visibility and an additional route to new funds for a company that has managed its growth and expansion during the past few years with a steady hand, never stretching beyond its capabilities or picking battles it couldn't win.

While being a listed company will eat up resources, in terms of management time and cash, those additional demands should be outweighed by the gains, and provide Transmode's investors with a return on their investments.

The IPO will also indicate whether investors have an appetite for a competitive telecom infrastructure vendor in a market that, to many, may look like it's being increasingly dominated by Chinese suppliers. Transmode's ability to grow and squeeze profits in a highly competitive market will no doubt attract investors seeking a vehicle that promises steady growth under safe management.

For more
Transmode has been expanding into new niches and growing its customer base for the past few years:

— Ray Le Maistre, International Managing Editor, Light Reading

digits 12/5/2012 | 5:05:18 PM
re: Transmode Unveils IPO

Key to the success in the first few years wil be keeping the curent senior team in place. They have navigated Transmode through the metro optical market in the past few years and, while not a Tier 1 player, have taken a relative minnow and built it into a focused metro and access transport company that can pitch for all sorts of deals and stand a chance of winning. What Transmode doesn't need is a change at the top and the introduction of figures that believe the company can take on the big boys head-to-head across a broader range of markets and verticals.

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