ALAMEDA, Calif., March 30 (Reuter) - U.S. networking company Ascend Communications Inc said on Sunday it signed a definitive agreement to aquire Cascade Communications Corp in a stock swap valued at about $3.7 billion.
Under terms of the deal, each share of Cascade common stock would be exchanged for 0.7 of a share of Ascend common stock, Ascend said. Based on Ascend stock's closing price on March 27, the deal was valued at about $3.7 billion, it said.
Ascend said it would take a one-time charge in the third quarter for merger-related costs.
Ascend shareholders would own about 65 percent and Cascade shareholders would own about 35 percent of the combined company's shares, they said.
"Ascend and Cascade share a common vision of an emerging network infrastructure that delivers end-to-end networking solutions to a broad base of customers," said Mory Ejabat, Ascend's president and chief executive officer.
Ejabat would remain president and CEO of the company, which would be called Ascend Communications and remain headquartered in Alameda, Calif. Cascade was based in Westford, Mass.
"The combination of the products, technologies and sales channels of both companies, with the leadership each company has in the different market segments, will position the new Ascend as one of the networking industry's premier providers of end-to-end networking solutions for carriers, ISPs (internet service providers), network service providers and small to large businesses," Ejabat said.
An Ascend spokeswoman said if the deal closed in the September quarter, it was expected to be mildly dilutive this fiscal year but accretive in 1998. She said the size of the charge Ascend would take had not yet been determined.
In a separate announcement, Cascade said it expected its first quarter earnings and revenues to be below analysts' expectations. Their quarter ended March 29.
Cascade said based on available information, it estimated first quarter revenues would be around $90 million and earnings, excluding a one-time charge associated with its acquisition of Sahara Networks Inc, would be in the range of $0.14 to $0.15 per share.
Ascend declined to comment on Cascade's announcement.
The deal was expected to be accounted for as a pooling of interests and qualify as a tax-free reorganisation, it said.
Once the deal, which is expected to be closed in the third quarter, was completed, Ascend said it would reorganise into four business units -- multimedia access products, remote products, access and concentrator products and core switching systems.
Cascade President and CEO Dan Smith would join the company as executive vice president and general manager of the core switching systems unit, the company said.
This unit would have responsibility for all asynchronous transfer mode, frame relay and IP switching products, including Ascend's family of GRF IP switches, it said.
Ascend's Bob Dahl would continue to serve as chief financial officer of the combined company, it said.
Ascend said the Cascade acquisition would be one of the largest mergers in networking industry history.
Outstanding options to buy Cascade stock would be converted at the exchange ratio into Ascend options, the company said.
In connection with the deal, each company granted the other an option, exerciseable under certain conditions, to buy shares equal to about 19.9 percent of the other company's outstanding shares, Ascend said.
The transaction is subject to certain conditions.
Deutsche Morgan Grenfell was a financial adviser to Ascend in the deal and Morgan Stanley & Co was Cascade's adviser, the company said.
Ascend provides remote networking solutions and Cascade is involved in broadband data communications with its family of scaleable, carrier class frame relay, ATM and IP switching products.
--New York newsdesk 212-859-1610
23:21 03-30-97
|
