ADVA Swoops for MRV in 'Strategic' $69M Bid
ADVA plans to acquire US rival MRV Communications in a $69 million deal it says will strengthen its line-up of products and broaden its customer base. (See ADVA to Acquire MRV.)
The takeover, in which ADVA Optical Networking (Frankfurt: ADV) is to pay $10 per share for all of MRV's outstanding common stock, would represent the German vendor's second big "strategic" acquisition during the past 18 months following its $35 million takeover of NFV specialist Overture Networks Inc. in January last year. (See ADVA Adds NFV Smarts With $35M Overture Acquisition and ADVA CEO: Overture Acquisition Adds to Our Open NFV Pitch.)
MRV Communications Inc. (Nasdaq: MRVC) holds attractions for ADVA due to its range of optical, Ethernet and software products as well as its customer base outside Europe. Last year, MRV reported revenues of about $80.3 million, although these were down from $88.2 million in 2015. The company's net loss also widened over that period from $7.2 million to $11.6 million.
ADVA clearly believes there are growth and efficiency opportunities that would cancel out those losses. MRV "has driven some key innovations and played an important role in shaping our industry," said Brian Protiva, ADVA's CEO, in a company statement. "We believe there is a strong synergy between our two companies."
ADVA's own sales soared from €441.9 million ($504 million) in 2015 to about €566.7 million ($646 million) last year, while net income fell by about a fifth, to €21.5 million ($24.5 million).
There is, however, some uncertainty over the deal, which has yet to secure shareholder support: ADVA's offer is only slightly above MRV's closing price of $9.85 on the Nasdaq on June 30. MRV's share price has fallen from $11.59 a year ago.
Reports in the German press indicate that ADVA has been able to win the backing of MRV's biggest shareholder, Raging Capital Management, as well as several executives, giving it commitments representing about 34% of MRV's shares.
But it needs further support for the deal. "The acquisition is subject to customary closing conditions, including the tender of at least a majority of MRV Communications, Inc. outstanding shares of common stock," ADVA noted in its announcement of the deal.
The German press reports also note that ADVA plans to finance the deal through a bank loan. It aims to complete the transaction by the end of September.
Trumpeting the success of its earlier takeover activity, ADVA said the Overture acquisition had led to the creation of one of the industry's most successful NFV product suites in the form of the Ensemble range. US telco giant Verizon Communications Inc. (NYSE: VZ) is now using Ensemble products to support its rollout of universal customer premises equipment, it added.
Speaking about the importance of the move for MRV, ADVA CFO Uli Dopfer said: "It not only strengthens our cloud access portfolio, but it also opens the door to new customers. There can be no question that this acquisition will present many new business opportunities, especially for communications service providers who are seeking to explore the possibilities of virtualized network services."
— Iain Morris, , News Editor, Light Reading