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Arvind Chhatbar. (Darren Brown, OBJ)

Layoffs are coming down the pipeline following the completion of Enablence Technologies Inc.'s (TSX-V:ENA) acquisition of New Hampshire's Pannaway Technologies Inc., although Ottawa workers will not be affected.

The optical products maker said it expects to see net cost savings of more than $11 million per year after implementing its "integration opportunities," including cuts in research, product development, operations and administration.

In an interview, Enablence CEO Arvind Chhatbar said the cuts would affect employees in Portsmouth, N.H., Alpharetta, Ga., and Plano, Texas working in its own FTTx division and for Pannaway.

"In avoiding duplication of activities, projects and operational people, we do expect significant savings," he said, although he declined to comment on specific numbers. "We hope to be able to define it as we take over the operations."

At the corporate level, Enablence's head of European operations, Peter Cairoli, and the senior vice-president of corporate development and administration, Dan Hilton, will see their jobs eliminated. Former Pannaway president Mark Carpenter will take over the North American sales operations for Enablence's new network division, which will include Pannaway, with the segment's current head, Tom Tighe, continuing to lead the division.

The deal will see Enablence issuing an aggregate of 20.25 million of its common shares, three million of which will be held in escrow, and it will pay US$200,000 to Pannaway shareholders. The company will also issue 5.5 million common shares of Enablence to pay off some of Pannaway's debts, as well as 10-year convertible notes to four debtholders, in the aggregate of US$3 million bearing interest at five per cent per annum.

Enablence's shares closed at 22.5 cents on Wednesday on the TSX Venture Exchange, valuing the deal at roughly $6 million.

The merger will give Enablence access to more than 420 customers in the United States and Canada who are currently using Pannaway's DSL (digital subscriber line) platform, allowing Enablence to offer those customers a "migration path" to its newer fibre-to-the-home optical Internet technology.

"Instead of forcing customers to move from one technology to another, which would be especially difficult in the current economic climate, we now provide customers who want to go to our fibre-to-the-home platform with a gradual migration path so they won't have to displace their existing platform ... (or) change all their existing infrastructure," he said. "We'll continue to support the existing broadband activities. As well, instead of building a market force in the United States and Canada, which would take significant time and effort and a ton of convincing, this is a quicker way to do it."

Mr. Chhatbar said the move ought to grow Enablence's presence closer to home, as the company's offerings are already fairly well-recognized internationally.

Enablence said it expects to spend between $6 million and $7 million of its cash during its third quarter, including transaction-related costs of approximately $1.5 million, although it added it expects to reduce its spending once the "full impact of the savings from integration is achieved." The company currently has $32 million in cash, cash equivalents and short-term investments.

However, Mr. Chhatbar added the investment is a worthy one considering the opportunities ahead for the company's next-generation products.

"Infrastructure and broadband growth are part of the stimuli economies around the globe require to become innovative. It's the right time and the right space."