A Waterloo, Ont.-based provider of network policy control for communications service provider has spurned one deal to go private in favour of another more lucrative offer which will see it merge with a U.S. network traffic management specialist.

Sandvine Corp. said Monday it has entered into a $562 million deal to be bought by PNI Canada Acquireco Corp., an affiliate of U.S. private equity firm Francisco Partners. When the deal goes through Sandvine will then be merged with Francisco-owned Procera Networks. The combined company, to be called Sandvine, will be led by Procera’s  chief executive Lyndon Cantor and Procera’s chief financial officer.

This comes after Sandvine said in May it was going to be bought by Vector Capital for $483 million. But that deal reportedly included a provision allowing it 42 days to shop for a better deal. On June 27 Sandvine reported it had an offer from Francisco Partners. Just before announcing the Francisco offer it terminated the Vector deal, although it had been sweetened. Sandvine paid $16.9 million, less applicable withholding taxes, for rejecting that offer.

Sandvine will hold a special meeting of shareholders shortly to approve the deal. Its Canadian customers include maritime cable and wireless provider Eastlink and rural high speed Internet provider Xplornet.

“This is a very exciting next step for Sandvine and Procera,” Dave Caputo, Sandvine’s president and CEO — who will join the board of the combined company as non-executive chairman — said in a statement. “As technologies and networks continue to evolve, I firmly believe that the combination of Sandvine and Procera creates the premier provider in our markets—with the scale and innovation needed to address our customers’ opportunities to build more intelligent networks.”

“Sandvine has done a tremendous job becoming a leader in its market,” said Lyndon Cantor, the Chief Executive Officer of Procera.  “Along with the rest of the Procera team, we look forward to bringing the best of both companies together to accelerate our strategy as the preeminent provider in the emerging Network Intelligence market.  The combined organization will deliver greater capability to serve our customers, execute on innovation initiatives and expand our addressable market.”

Andrew Kowal, a partner at Francisco Partners, noted the combined company will serve over 400 communications service provider customers with over 1 billion subscribers in more than 100 countries, as well as over 500 enterprise customers and more than 100 OEM and channel partners. “We are confident that the combined capabilities of these two companies will deliver more innovative solutions and greater value to customers,” he said in a statement.

Sandvine was founded in 2001. It makes network policy control solutions for fixed, mobile and converged communication service provider networks including Comcast in the U.S., O2 in the United Kingdom, Telecom Italia, and Vox Telecom in South Africa.  Procera provides network visibility and control across mobile and fixed broadband networks.

Also on Monday Sandvine reported  Q2 results including net income of US$1.1 million on revenue of $27.5 million , a drop in profit of 73 per cent compared to the same period a year ago.

Last week it said the just announced Intel Xeon Scalable processor platform will provide their Policy Traffic Switch (PTS) Virtual Series customers with up to 60 per cent more packet processing power.