(Applies to: PDYN ELAS)
Paradyne Networks, Inc. and Elastic Networks Inc. Announce Merger
Acquisition Expands Paradyne's Broadband Access Market Position with
In-Building Product Solutions and IP-based DSL Technology
LARGO, Fla. & ATLANTA, Dec 28, 2001 (BUSINESS WIRE) -- Paradyne Networks, Inc.
(Nasdaq:PDYN) and Elastic Networks Inc. (Nasdaq:ELAS) today announced they have
entered into a definitive agreement for Paradyne to acquire Elastic. Under the
terms of the merger agreement, Elastic stockholders will receive .1990 to .2692
shares of Paradyne common stock for each outstanding share of Elastic common
stock, based on the 10-day average closing price of Paradyne common stock prior
to the consummation of the merger. The exchange ratio range may be subject to an
adjustment based on the net working capital of Elastic prior to the merger.
Based on the closing price of Paradyne stock on December 27, 2001 ($3.77),
Elastic shareholders would receive equivalent value of $0.86 per share in
Paradyne stock. The transaction is valued at approximately $28.8 million. The
merger, which was approved by the boards of both companies, is subject to
stockholder approval at each company and other customary closing conditions. The
transaction is expected to be completed in the first quarter of 2002.
Commenting on the proposed merger, Sean Belanger, Paradyne's president and CEO,
stated: "The purchase is a natural extension of our DSL product portfolio. We
are excited about four key elements of the transaction. 1) This transaction
launches Paradyne into the In-Building DSL market. Combining Elastic's products
with our worldwide channel is a great fit for this market. 2) Elastic, like
Paradyne, has a strong and complimentary base of Independent Telephone Companies
as customers. We expect that the combination will result in over 200 ITCO
customers. 3) Elastic brings great technology development in EtherLoop as well
as Elastic's 100 Megabit EtherLoop2 to be released in the first half of 2003. 4)
We believe the cash and working capital of Elastic provides the combined
companies a stronger balance sheet. In addition, Elastic's leadership in
IP-based, next generation Ethernet broadband access technologies positions
Paradyne as a key player in the emerging Ethernet carrier network
architectures."
Guy Gill, President and CEO of Elastic Networks, commented: "We are very excited
at the opportunity to become part of Paradyne. To successfully expand globally
in the DSL marketplace, we needed to find a partner with established channels
and international reach. Paradyne's reputation for quality and innovation, as
well as their installed base in over 140 countries provides a solid foundation
to leverage our IP DSL technology and products. Additionally, Paradyne's
in-house manufacturing, testing facilities and quality control processes will
enable us to realize significant improvements in our product cost structures."
The merger agreement provides that the fraction of a share of Paradyne common
stock to be exchanged for each share of Elastic common stock (prior to the net
working capital adjustment) will be .2288 if the Paradyne stock price is between
$3.21 and $4.35. This exchange ratio will increase on a sliding scale to a value
between .2692 and .2288 if the Paradyne stock price is between $2.73 and $3.21,
and the exchange ratio will decrease to between .2288 and .1990 if the Paradyne
stock price is between $4.35 and $5.00. The exchange ratio will be fixed at
.2692 if the Paradyne stock price is less than $2.73, and will be fixed at .1990
if the Paradyne stock price is greater than $5.00. In addition, the fractions
described above will then be multiplied by an adjustment factor based on
Elastic's working capital to determine the final exchange ratio.
Certain of the directors and several of the executive officers of Elastic, and
Elastic's largest shareholder, Nortel Networks Inc., who in the aggregate own
approximately 14.4 million shares of Elastic common stock (approximately 46% of
outstanding shares), have agreed to support and to vote in favor of the
transaction at the Elastic stockholders' meeting. Certain of the directors and
executive officers of Paradyne, and certain stockholders associated with the
Texas Pacific Group, have entered into agreements with Elastic to support and to
vote up to approximately 11.6 million shares of Paradyne stock (approximately
35% of outstanding Paradyne shares) in favor of the transaction at the Paradyne
stockholders' meeting. Raymond James and Robertson Stephens are acting as
financial advisors and provided fairness opinions regarding the transaction for
Paradyne and Elastic, respectively. Alston & Bird LLP and Hunton & Williams are
acting as legal counsel for Paradyne and Elastic, respectively.
The proposed transaction will be submitted to Paradyne's and Elastic's
stockholders for their consideration, and Paradyne will file with the SEC a
registration statement containing the joint proxy statement-prospectus to be
used by Paradyne and Elastic to solicit their respective stockholders' approval
of the proposed transaction, as well as other relevant documents concerning the
proposed transaction. Stockholders of Paradyne and Elastic are urged to read the
registration statement and the joint proxy statement-prospectus regarding the
proposed transaction when they become available and any other relevant documents
filed with the SEC, as well as any amendments or supplements to those documents,
because they will contain important information. You will be able to obtain a
free copy of the joint proxy statement-prospectus included in the registration
statement, as well as other filings containing information about Paradyne and
Elastic, at the SEC's Web site (http://www.sec.gov).
Copies of the joint proxy statement-prospectus and the SEC filings that will be
incorporated by reference in the joint proxy statement-prospectus can also be
obtained, without charge, by directing a request to: Paradyne Investor Relations
727-530-8082, or to: Elastic, Darrell Borne 678-762-3843. Paradyne and Elastic
and their respective directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of Paradyne
and Elastic in connection with the merger. Information regarding those
participants is included in the proxy statements for the Paradyne and Elastic
annual stockholders' meetings for 2001, which are available at the SEC's Web
site. Additional information regarding the interests of those participants may
be obtained by reading the joint proxy statement-prospectus regarding the
proposed transaction when it becomes available.
Conference Call
Paradyne and Elastic Networks will host a conference call at 10:00 a.m. (ET) on
Friday, December 28, 2001, to discuss the acquisition plans. The live
teleconference can be accessed by direct dial at 706-634-6062. Or, the call can
be listened to via the Internet at paradyne.com (Windows Media
Player required).
About Elastic Networks
Elastic Networks is a broadband leader in first-mile Ethernet access solutions,
deploying its patented EtherLoop technology across a variety of products and
high-speed multi-media applications. With the introduction of the Storm
System(TM) family of intelligent IP-over-Ethernet products, Elastic Networks has
successfully addressed the needs of the carrier, enterprise, MDU/MTU and
hospitality markets for high-speed first-mile access solutions that deliver top
quality service to end users while eliminating costly deployment and complicated
support issues for service providers. Additionally, Elastic Networks is building
strategic relationships with distributor, chip manufacturing and data networking
partners.
The company has offices in Alpharetta, Georgia, and Hong Kong. For more
information about Elastic Networks and its patented EtherLoop technology and
products, visit elastic.com or contact Elastic's U.S. headquarters in
Alpharetta, Georgia at 678-297-3100. For investor information, e-mail our
Investor Relations group at irinfo@elastic.com, or call 678-297-3100.
About Paradyne
Paradyne is a leading developer of carrier-class, high-speed network access
solutions. A recognized market leader in digital subscriber line (DSL) and
service level management (SLM) solutions, Paradyne markets its award-winning
Hotwire(R) DSL, ReachDSL(TM) and FrameSaver(R) Service Level Management systems
to service providers and business customers. More than 15,900 Hotwire DSL Access
Multiplexers (DSLAMs) have been deployed around the world. Paradyne has shipped
over 150,000 ports of its unique ReachDSL solution, giving carriers the ability
to deliver broadband over almost any copper lines, even those that are very long
or severely impaired. Paradyne's SLM solutions have been deployed into
mission-critical enterprise networks by the leading carriers, including AT&T,
Bell Canada, Broadwing, Intermedia, SBC, Sprint, Verizon and WorldCom.
Paradyne is headquartered in the Tampa Bay area. More information is available
by calling 1-800-PARADYNE (U.S. and Canada), 1-727-530-8623 or visiting
paradyne.com.
This press release contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, particularly those
statements regarding the effects of the Elastic acquisition, and those preceded
by, followed by or that otherwise include the words "believes," "expects,"
"anticipates," "intends," "estimates," or similar expressions. For those
statements, Paradyne and Elastic claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements relating to expectations about future
results or events are based upon information available to Paradyne and Elastic
as of today's date, and neither Paradyne nor Elastic assumes any obligation to
update any of these statements. The forward-looking statements are not
guarantees of the future performance of Paradyne or the combined company and
actual results may vary materially from the results and expectations discussed.
For instance, while Paradyne and Elastic have entered into a definitive
agreement, there is no assurance that the parties will complete the transaction.
In the event the companies do not receive necessary stockholder or other
approvals or fail to satisfy conditions to closing, the transaction will
terminate. Additional risks and uncertainties related to the Merger include, but
are not limited to, conditions in the financial markets relevant to the proposed
Merger, the successful integration of Elastic into Paradyne's business, and each
company's ability to compete in the highly competitive data communications
equipment industry. The revenues and earnings of Paradyne and the combined
company and their ability to achieve their planned business objectives will be
subject to a number of factors that make estimates of future operating results
uncertain. These factors include: the timing and amount of expense reduction;
the uncertainty of litigation, including putative stockholder class actions; a
reliance on international sales; rapid technological change that could render
Paradyne's or the combined company's products obsolete; the uncertain acceptance
of new telecommunications services based on DSL; substantial dependence on
network service providers who may reduce or discontinue their purchase of
products or services at any time; the timing and amount of, or cancellation or
rescheduling of, orders of Paradyne's or the combined company's products to
existing and new customers; possible inability to sustain revenue growth or
profitability; dependence on only a few customers for a substantial portion of
Paradyne's or the combined company's revenue; highly competitive markets;
reliance on sales of access products to BB Technologies Corporation (a newly
formed subsidiary of SOFTBANK CORP.), Lucent Technologies and Avaya Inc.;
dependence on sole and single-source suppliers and the reliability of the raw
materials supplied by them to manufacture products under customer contracts; a
long and unpredictable sales cycle; the number of DSL lines actually deployed by
BB Technologies Corporation and other DSL customers as compared to forecasts;
Paradyne's or the combined company's ability to manufacture adequate quantities
of products at forecasted costs under customer contracts; Paradyne's or the
combined company's ability to manufacture products in accordance with its
published specifications; and other risks identified from time to time in
Paradyne's and Elastic's SEC reports and public announcements.
Editor's Note: Visit Paradyne's virtual press room at
paradyne.com for product images and/or
additional information. Product availability and pricing subject to change
without notification. Hotwire Connected, ReachDSL, Smart Room, Tripleplay and
TruePut are trademarks of Paradyne Corporation. ACCULINK, COMSPHERE, ETC,
Hotwire, FrameSaver, NextEDGE, MVL, OpenLane, Paradyne, the Paradyne logo and
Performance Wizard are registered trademarks of Paradyne Corporation. All other
service marks and trademarks are the property of their respective owners.
CONTACT: PARADYNE NETWORKS, INC.
Investor Relations, 727/530-8082
ir@paradyne.com
or
Press Relations
Jennifer Righi, 727/530-2529
jrighi@paradyne.com
or
ELASTIC NETWORKS INC.
Investor Relations
irinfo@elastic.com
or
Press Relations
Darrell Borne, 678/297-3100
dborne@elastic.com |
