Zhone Acquires Paradyne

Zhone Technologies to acquire Paradyne Networks for $180M

July 8, 2005

4 Min Read

OAKLAND, Calif. and LARGO, Fla. -- Zhone Technologies, Inc. (Nasdaq: ZHNE), the first company dedicated solely to delivering the full spectrum of next-generation access infrastructure equipment, today announced that it will acquire Paradyne Networks, Inc. (Nasdaq: PDYN), a leading provider of triple play broadband loop carriers (BLCs) and Ethernet access equipment.

Under the terms of the agreement, 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 yesterday, 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. The proposed stock-for-stock transaction is intended to qualify as tax-free to the stockholders of Paradyne.

The acquisition of Paradyne by Zhone is expected to have the following results:

  • Provide scale to allow for further growth and more comprehensive sales, service and support.

  • Bolster Zhone's position as a leading provider of next generation Broadband Loop Carrier access network solutions.

  • Provide service providers with more comprehensive solutions for delivering packet based voice, data and video services as these technologies converge.

  • Provide for substantial cost savings from the reduction of operating expenses and is immediately accretive excluding any acquisition related charges.

  • Strengthen Zhone's balance sheet with a larger net cash balance.

The transaction is also expected to expand the customer base of the combined company to include 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. The combined company will have employees operating in 21 countries around the globe.

"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. "The combined product portfolios will provide customers with unparalleled ability to maintain legacy services while simultaneously migrating their operations to pure packet for delivery of new VoIP, data and IP video services over both copper and fiber."

"We believe this transaction is beneficial to Zhone stockholders, Paradyne stockholders and to the respective customers of both companies," said Sean Belanger, chairman and chief executive officer of Paradyne. "The combined company will have the scale to accelerate Paradyne's position as a leader in the telecommunications industry. Zhone's and Paradyne's solid product portfolios, broad customer bases and strong financial performances are ingredients for continued success."

Both Sean Belanger and Pat Murphy, chief financial officer of Paradyne, have agreed to remain with Zhone as consultants for up to two years to assist in the transition.

The transaction is subject to the approval of each company's stockholders, regulatory review as well as other customary closing conditions. The transaction is currently expected to close in the fall of 2005. The time, location and other details regarding each company's stockholders meeting will be communicated to stockholders at a later date.

Paradyne retained Raymond James as its financial advisor and Alston & Bird as its legal advisor. Zhone enlisted the assistance of Needham & Company to facilitate the transaction. Latham & Watkins served as Zhone's legal advisor in the transaction.

Zhone also announced today 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 today 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.

Zhone Technologies Inc.

Paradyne Networks Inc.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like