French media and entertainment technology group Technicolor will buy Cisco System's home video equipment business for 550 million euros ($602 million), it said on Thursday. The cash-and-stock deal is part of Technicolor's efforts to expand in the home video market. The French company will become the world No. 2 in customer premises equipment (CPE) - phone gear, cable and satellite TV set-top boxes, routers and switches. The transaction will also boost Technicolor's footprint in North America.

Under the terms of the deal, Cisco will receive about 413 million euros in cash and about 137 million euros in newly issued Technicolor shares, subject to certain adjustments provided for in the agreement.

"Video is what is driving traffic today," said Technicolor CEO Frederic Rose. "All this is fueling a massive demand for customer premises television equipment."

The transaction is expected to close by the end of the fourth quarter of 2015 or in the first quarter of 2016.

After completion, Technicolor said its Connected Home division should reach adjusted EBITDA in excess of 200 million euros by the end of 2016, and an adjusted EBITDA margin of 8-9 percent by 2017.

The deal will also boost earnings per share by a double-digit percentage at a group level as of 2016, Technicolor said.