Zhone Technologies to Buy 60% of Tellium
Monday July 28, 9:54 am ET
OAKLAND, Calif. (Dow Jones)--Closely held Zhone Technologies Inc. agreed to acquire 60% of Tellium Inc. (NasdaqSC:TELM - News) in a stock-for-stock transaction.
Under terms of the definitive agreement, Tellium stockholders would hold the remaining 40% of the combined company's fully diluted shares.
In a press release Monday, telecommunications company Tellium said Zhone would receive about 197 million newly issued shares, options and warrants to buy stock, with the exact number of shares issued depending on Tellium's fully diluted shares outstanding immediately before closing.
Tellium's Nasdaq-traded shares closed at 91 cents Friday. The company has about 114.4 million shares outstanding.
The transaction is expected to close in the fall, subject to closing conditions.
Separately, Tellium reported a second-quarter loss of $12.1 million, or 12 cents a share, compared with a loss of $213.8 million, or $1.98 a share, a year earlier.
Excluding non-cash charges related to equity issuances, stock-based compensation costs, amortization, restructuring charges and impairment of long- lived assets, Tellium's operating loss for the second quarter was $7.4 million, or 7 cents a share.
Gross profit on a U.S. GAAP basis was about $4 million, resulting in a gross margin of 39%.
Revenue rose to $10.1 million from $3.1 million a year ago.
Tellium ended the second quarter with about $149.8 million of cash on hand, a reduction in cash of about $7.4 million during the quarter.
Tellium said Zhone's chairman and chief executive, Mory Ejabat, will become chairman and chief executive of the combined company, which will be named Zhone Technologies and trade on Nasdaq under the symbol "ZHNE."
Tellium said the combined company will be a "leading provider of access, metro and core optical solutions to the global telecommunications industry," with a combined cash position at June 30 of more than $150 million and a combined customer base above 250.
The company also expects the transaction to produce substantial cost savings from reductions of operating expenses.
Morgan Stanley was financial adviser to Tellium on the transaction, while Credit Suisse First Boston and Lehman Brothers advised Zhone.
Tellium and Zhone have scheduled a conference call for investors to discuss the deal at 5 p.m. EDT.
Last January, Tellium said it would cut 130 jobs, or 41% of its staff, because of the slump in the telecom sector.
Oakland, Calif.-based networking company Zhone was founded by senior management of Ascend Communications Inc., which was acquired by Lucent Technologies Inc. (NYSE:LU - News) in June 1999.
Tellium's shares recently traded at $1.11, up 20 cents, or 22.1%, on Nasdaq composite volume of 2 million shares, nearing average daily volume of 2.2 million shares.
-Tom Rojas; Dow Jones Newswires; 201-938-5400 |
