Excel Catches $173M Brooktrout
Excel’s parent company, EAS Group, will pay $13.05 per share for all outstanding Brooktrout stock -- a 38 percent premium on the closing price of the stock Wednesday (see Brooktrout Posts Q2 Profit).
Brooktrout's shares shot up 35 percent to $12.79 on news of the sale Thursday.
Brooktrout is best known for its enterprise IP fax servers and for its , which is used in carrier networks to enable voice, video messaging, fax, and data applications (see Brooktrout Demos Video Messaging ).
Excel sells media servers, signaling gateways, and media gateways, and derives 60 percent of its revenues from sales of TDM-based products.
Excel CEO Marc Zionts will act as CEO of both companies as of Thurday. Zionts became CEO of Excel in May 2003, when the company was spun out of (NYSE: LU). Brooktrout founder and president Eric Giler leaves “to pursue other interests,” but not before signing a one-year non-compete agreement, according to an SEC filing.
Strategically, the deal is meant to open up new markets for both companies' product portfolios. Brooktrout has a decidedly enterprise-oriented view of the world, while Excel has done business mainly with carriers. The two companies believe that the technical requirements for IP telephony gear have become very similar in both markets.
One big draw for Excel was Brooktrout’s Snowshore IP media server, Excel president JC Murphy tells Light Reading. “In our humble opinion, Brooktrout is one of the top two providers of IP-based media servers,” Murphy says, being the other.
Excel currently sells TDM-based media servers to carriers, but will now be able to offer the Snowshore product to carriers transitioning to IP, Murphy says (see NTT Picks Excel's Media Gateway ).
And that’s not all Excel saw in Brooktrout. “Brooktrout has just a rock-solid IP Fax server product,” Murphy says (see Brooktrout Unveils Fax-Over-IP Kit). Murphy says Brooktrout has made considerable headway selling the product to small- and medium-sized enterprises (see Brooktrout Tops Fax Boards). The expanded portfolio the new company will bring to both enterprises and carriers, Murphy believes, will lessen the chance of having to OEM equipment from a third party, which he says typically doesn’t yield much margin. If there are losers in the acquisition it might be the two companies’ old trading partners (see Excel, IP Unity to Partner). For example, Brooktrout currently OEMs a media gateway product from AudioCodes Ltd., which will now be replaced by an Excel media gateway, Murphy says. Murphy believes the merger might open up some new geographic markets for both companies, too. Two-thirds of Excel’s 125 customers have been in Europe, the Middle East and Africa, and Asia/Pacific, while 80 percent of Brooktrout’s $80 million in revenue last year derived from sales in North America.
“That’s what Brooktrout really saw in this,” Murphy says. And efforts have already begun to increase the visibility of Brooktrout’s technology. “I’ve gotten things working already with our distribution channels in Southeast Asia and China, as well as in Eastern Europe,” he says.
Murphy says Excel now has its gear in the networks of (NYSE: VZ), (NYSE: SBC), and (NYSE: BLS), and that most of its Tier 1 business is done through integrators. Excel brought in about $50 million in revenue last year, according to an SEC filing.
The acquisition was financed by EAS investors Oak Investment Partners, TowerBrook Investors, L.P., and Anschutz Investment Company.
Brooktrout is based in Needham, Mass., while Excel is located in Hyannis, Mass. No word yet on how the deal will affect headcount or facilities. The two companies will now embark on a “100-day integration plan.”
The deal is expected to close in the fourth quarter of 2005.
— Mark Sullivan, Reporter, Light Reading