Thursday, July 7, 2005

Zhone to Acquire Paradyne for $180 Million

Zhone Technologies agreed to acquire Paradyne Networks, a supplier of broadband loop carriers (BLCs) and Ethernet access equipment, in a stock swap valued at approximately $180 million.

Paradyne supplies a family of IP-based broadband access solutions, including BLCs, DSLAMs, Ethernet in the First Mile bonded solutions, IADs, and CPE. The products support both residential triple play solutions and business class bonded SHDSL, ADSL2+, T1/E1, and DS3 bonded solutions for LAN extension and cell site data backhaul applications.

Zhone's networking solutions include its Single Line Multi-Service architecture, Multi-Access Line Concentrator (MALC), "Raptor" ATM/IP DSLAMs, Residential Gateways , "GigaMux" Optical Transport Systems and Zhone Management System.

Under the deal, Zhone will issue 1.0972 shares of Zhone common stock for each outstanding share of Paradyne common stock, and each option, warrant and other security exercisable or convertible into Paradyne common stock will be assumed by Zhone and become exercisable or convertible into Zhone common stock, with appropriate adjustments based on the merger exchange ratio. Based on Zhone's closing price on 07-July-05, the transaction is valued at $3.917 per Paradyne common share. On a fully-diluted basis, the current stockholders of Paradyne will own approximately 36.8% of the combined company and the current stockholders of Zhone will own approximately 63.2% of the combined company.

Zhone's said the acquisition woul bolster its position in next generation Broadband Loop Carrier access network solutions. The deal would also strengthen Zhone's balance sheet with a larger net cash balance.

The combined company would serve twelve of the top twenty-five U.S. Independent Telephone companies, including five of the top ten as well as two of the top three U.S. cable operators and leading U.S. competitive carriers. Also of significance, the transaction will scale operations in every operating region with complementary key accounts in EMEA, APAC, Japan and CALA.

"Together, Zhone and Paradyne will deliver a broad array of products that allow carriers to extend their current access networks," said Mory Ejabat, chairman and chief executive officer of Zhone.

Zhone also announced that revenues for its second quarter are expected to be slightly higher than the guidance previously provided of between $29 million and $30 million. Other than these slightly higher revenues, Zhone expects its results to be in line with previously provided guidance.

Paradyne also announced that revenues for its second quarter are expected to be slightly higher than guidance and that EPS and gross margin percentage will also slightly exceed guidance.

Paradyne is based in Largo, Florida. Zhone is based in Oakland, California.

  • In July 2004, Paradyne acquired Net to Net, a privately-held supplier of DSL access equipment based in Portsmouth, New Hampshire. Among its offerings, the company supplied a bonded SHDSL platform and a line of "Network Extenders."

  • In April 2004, Zhone acquired Sorrento Networks Corporation, a supplier of metro-optical transport and access products. San Diego-based Sorrento Networks' GigaMux product family consists of access, metro, and regional optical networking systems. Its customer base and market focus includes cable TV operators, telecom carriers, and service providers.

  • In February 2004, Zhone Technologies acquired the assets of Gluon Networks, a start-up based in Petaluma, California for approximately $7.0 million. Gluon had been developing next-generation converged switching systems for service providers.

  • In November 2003, Zhone Technologies completed its merger with Tellium, a publicly traded developer of core optical switching systems.


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