NENG reshuffles the deck:
Network Engines Announces Acquisition of Alliance Systems
Wednesday October 10, 8:00 am ET
Combination Is Expected to Expand Breadth of Markets, Diversify Customer Base And Be Accretive to Earnings
CANTON, Mass.--(BUSINESS WIRE)--Network Engines, Inc. (NASDAQ: NENG - News), a leading provider of storage and security server appliance products and services, today announced it has entered into a definitive agreement to acquire privately-held Alliance Systems, Inc., a leading provider of server appliances and computer infrastructure supporting telecommunications and enterprise communications solutions. Valued at approximately $40 million, the transaction will be funded through a combination of approximately $35 million in cash, which includes the payment of certain of Alliance's debt obligations, and approximately 2.7 million shares of Network Engines' common stock.
Based in Plano, Texas, Alliance Systems provides server appliances and enhanced support services for wireless, VoIP, contact center and enterprise communications solutions. Similar to Network Engines, the majority of Alliance Systems' revenue comes from services to OEM customers. In its fiscal year ended December 31, 2006, Alliance Systems had more than 250 active customers, only two of which contributed 10% or more of revenue, one at 15% and the other at 10%. For the 2006 fiscal year, revenue was approximately $102 million and operating income was approximately $3.2 million. For the nine months ended September 30, 2007, Alliance Systems had unaudited revenue and operating income of approximately $79 million and $2.0 million, respectively. Its largest customer contributed only 10% of its revenue for the nine-month period.
Through the acquisition of Alliance Systems, Network Engines enters new vertical markets and anticipates leveraging a broader range of capabilities to address market needs for converged solutions. Network Engines also expects to realize economies of scale based on similarities between the two companies' business models, their compatible approach to development of system solutions, and their complementary focus on OEM customers. Furthermore, it is expected this transaction will diversify Network Engines' customer base and accelerate its progress toward achieving its financial objectives.
"We are pleased to partner with an established, profitable company that is highly complementary to Network Engines' business," said Greg Shortell, President and Chief Executive Officer of Network Engines. "Alliance Systems' strong position in telecommunications complements Network Engines' expertise in storage and security. These markets are experiencing a convergence of technologies, which creates new applications. We believe that Network Engines is well positioned to meet the industry's needs in this exciting growth opportunity, and expect the acquisition will allow us to better serve customers, while creating significant value for our shareholders."
Alliance Systems is expected to add approximately $100 million to Network Engines' annual revenue and significantly diversify its customer base. In addition, the transaction is expected to be immediately accretive to earnings on a non-GAAP basis, when excluding stock compensation and the effects of acquisition-related charges including amortization of intangible assets. The potential future impact of the transaction on Network Engines' earnings on a GAAP basis cannot be measured until the conclusion of the company's analysis to determine the fair value of any acquired intangible assets that would be amortized over the life of such assets.
Customers of the combined company can benefit from value-added offerings such as Network Engines' appliance management system, NEWS, and Alliance Systems' on-site support capability, which offers service, parts and logistics in the Americas, EMEA and Asia. With logistics locations in 15 U.S. cities, the U.K., the Netherlands, South Africa, Germany and the Philippines, Alliance Systems will also expand Network Engines' global services and logistics organization with very little overlap of existing operations.
"Joining forces with Network Engines will allow both companies to apply existing capabilities in new markets and provide customers with expanded product offerings," said Jonathan Shapiro, Chief Executive Officer of Alliance Systems. "I am confident this acquisition will allow us to build a stronger combined company and better serve customers."
The combined company will initially operate under the Network Engines name with Alliance Systems branded as a subsidiary. The company will have cash of $5 million to $7 million upon closing of the transaction with a new available credit facility of $15 million.
The acquisition has been unanimously approved by the Board of Directors of Network Engines and also has been approved by the principal shareholders of Alliance Systems. Although subject to customary closing conditions, the transaction is expected to close within one week of the definitive agreement announced today. The transaction does not require approval of Network Engines' shareholders.
Needham & Company, LLC. represented Network Engines in this transaction, while Cantor Fitzgerald & Co. served as financial advisor to Alliance Systems.
Conference Call Details
In conjunction with this announcement, Network Engines management will conduct a conference call at 10:00 a.m. ET today. The conference call will be available live via the Internet by accessing Network Engines' web site at www.networkengines.com. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software.
To listen to the conference call via phone, please dial 913-312-1272 and reference "Network Engines." For those who cannot access the live broadcast, a replay will be available by dialling 719-457-0820 or 888-203-1112 and entering "9965444" from two hours after the end of the call until 11:59 p.m. ET on October 17, 2007. The replay will also be available at the Network Engines web site.
<snip>
biz.yahoo.com |
