ADIC pays $265M for Pathlight
by Danny Fortson theDeal.com
Posted 09:00 EST, 30, Jan 2001
Advanced Digital Information Corp. agreed Tuesday, Jan. 30, to issue $265 million in stock to buy Pathlight Technology Inc., a privately-held provider of storage area network products that generated just $20 million in revenue last year.
Under the definitive agreement, ADIC will issue 10.3 million common shares for all the outstanding stock, warrants and options in Pathlight. The deal will be accounted for as a pooling-of-interests. Directors of both companies already have approved the combination, while 75% of Pathlight shareholders have agreed to the deal.
The value is based on ADIC's closing share price of $25.69 Monday, Jan. 29. The Redmond, Wash.-based company expects to absorb a one-time charge of $10 million to $12 million in the second quarter, during which the deal is expected to close. ADIC canceled a previously announced stock buyback program to enable a pooling-of-interests accounting for the deal.
ADIC makes automated-tape libraries that serve as a backup to disc and network storage for businesses such as Dell Computer Corp., IBM Corp. and Ingram Micro Inc. Seven-year-old Pathlight provides storage-area network hardware and software to companies, and for the fiscal year ended October 2000, the Ithaca, N.Y.-based company earned about $5 million on $20 million in revenues.
Pathlight has received at least four rounds of venture backing since its inception in 1994. Investors in the company include Buffalo, N.Y-based Rand Capital Corp., which has invested about $2 million in the company over four rounds of funding. Rand held a 5.2% stake in the company as of January 2000, the company’s last private fundraising.
Ventana Global, a venture capital firm based in Irvine, Calif. poured $900,000 into the company in the January 2000 financing round.
Though both companies expect 40% revenue growth in 2001, ADIC warned that earnings may be diminished by as much as 10% per share due to costs related to the deal. However, the company believes the transaction will be accretive to fiscal year 2002 earnings.
Terms of the deal also stipulate about 1.3 million shares of the 10.3 million total shares will be set aside in two escrow agreements. These are to be distributed upon the satisfaction of undisclosed potential liabilities or adjustments detailed in the merger agreement |
