Networking startup Mayan Networks announced today that it will acquire Ariel Corp. (Nasdaq: ADSP) in an all-stock deal (see Mayan to Merge With Ariel).

The deal is a reverse merger, in which a younger startup company uses its stock to buy a public company. Ariel trades on the Nasdaq with a market capitalization of only $18 million. Mayan, a venture-backed company, is a late-stage startup that recently announced its first customer (see Mayan Finds a Customer).

All of the shares, options, and warrants in Mayan stock will be exchanged for securities representing 90 percent of the merged company, according to a statement released by the two companies this evening. Ariel shareholders, option holders, and warrant holders will retain an approximately 10 percent interest in the combined company.

Based on Ariel's closing price of $1.34 on Wednesday (giving it a market capitalization of $17.6 million), that puts the value of the combined company at about $176 million.

According to a statement filed with the SEC in November of last year, Ariel had nine-month revenues of $5.3 million and a net loss of $12.7 million for the period ending Sept. 30, 2000. At the same time it reported only $3.9 million in cash on its balance sheet. Light Reading was unable to locate more recent filings for the company.

Those kinds of numbers clearly indicate this isn't exactly a blockbuster liquidity event -- but it does earn the investors and employees of Mayan the ability to trade their stock, which may be the driving force behind the deal.

Another motivation? Esmond Goei, founder and Chairman of Mayan, also happens to be vice chairman of the board of Ariel. Goei will become CEO of the new company, replacing Ariel CEO Dennis Schneider.

Robertson Stephens served as an advisor on the deal.

Mayan has raised more than $90 million of venture capital funding to produce a Sonet-based multiservice access box.

Technologically, the companies plan to integrate Mayan's multiservice access platform with Ariel's remote-access server technology, according to the release. It quotes Goei: "The combination will allow us to market unique new SONET enabled solutions to carrier and ISP Remote Access Server (RAS) needs while continuing to pursue our current products and markets."

The company will have $50 million in cash and equivalents after the merger, according to both parties.

-- R. Scott Raynovich, Executive Editor,Light Reading http://www.lightreading.com