Monday, June 5, 2017

Extreme to acquire Avaya networking for $100m with winning bid

Extreme Networks announced that, having entered into an asset purchase agreement under which it would serve as primary bidder in a sale under the bankruptcy code to acquire Avaya's networking business for approximately $100 million, it has been approved as the winning bidder to acquire the Avaya business.

Under the bidding process, the assets of Avaya's networking business unit will be sold to Extreme for approximately $100 million, in accordance with the terms and conditions of the asset purchase agreement entered into on March 7th. The final agreement has been approved by the U.S. Bankruptcy Court for the Southern District of New York and is expected to close on or soon after July 1, 2017, subject to customary closing conditions and regulatory approvals.

As previously announced, Extreme anticipates that the transaction will be accretive to cash flow and earnings for its fiscal year 2018 starting July 1st, and expects to generate over $200 million in annualised revenue from the acquired networking assets. Extreme noted that the announcement builds on the strategy to expand its portfolio of data centre, core, campus and edge networking solutions via strategic acquisitions.

In mid-May, Avaya reported second quarter revenue for the period ended March 31, 2017 of $804 million, compared to first quarter revenue of $875 and prior year second quarter revenue of $904 million. For the second quarter it reported a net loss of $6 million, versus a net loss of $102 million in the first quarter and a net loss of $103 million in the 2106 second quarter.

For the third quarter ended march 31, 2017 Extreme reported revenue of $149 million, versus second quarter revenue of $148 million and revenue of $125 million for the prior year third quarter. The company reported net income of $11.6 million versus $12.7 million in the second quarter and net income of $3.5 million in the third quarter of 2016.

Avaya filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code in January this year, and in March entered into an asset purchase agreement under which Extreme would act as primary bidder in a section 363 sale under the bankruptcy code to acquire Avaya's networking business for approximately $100 million.

Avaya announced on January 19th that it was filing under chapter 11 of the U.S. bankruptcy code in the U.S. Bankruptcy Court, stating that its foreign affiliates were not included in the filing and would continue normal operations.

Extreme noted that in October 2016 it closed its acquisition of the wireless LAN business from Zebra Technology, which is expected to generate over $115 million in annualised revenue in fiscal year 2018. In March, Extreme announced an agreement to acquire the data centre switching, routing and analytics business of Brocade Communications Systems from Broadcom on closing of Broadcom's acquisition of Brocade. The Brocade transaction is expected to result in $230 million in annualised revenue.


Regarding the transaction, Ed Meyercord, president and CEO of Extreme Networks, said, "This strategic acquisition will be a further milestone in the execution of Extreme's growth strategy and establishes Extreme as the third largest competitor in its enterprise markets and the only company exclusively focused on delivering… end-to-end, wired and wireless enterprise IP networking".


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