December 13, 2013
As of December 12, 2013, Sonus has repurchased a total of approximately 18 million shares since the inception of its $100 million share repurchase program announced on July 29, 2013 and currently has approximately 267 million shares outstanding following the repurchases. Approximately $43 million remains available for future share repurchases either on the open market or in privately negotiated transactions.
Sonus Networks Announces Definitive Agreement to Acquire Performance Technologies, Inc.
Acquisition Expected to Fortify Sonus Mobility and Virtualization Strategies and Expand Sonus Addressable Market by 50%
Sonus Confirms Fourth Quarter and Full Year 2013 Guidance
Key Takeaways:
-- Transaction is expected to be accretive to non-GAAP EPS for full year 2015; mildly dilutive (two cents or less) in 2014.
-- Planned acquisition would accelerate Sonus' mobility strategy by adding Diameter Signaling capabilities required in all-IP, IMS 4G/LTE (Long Term Evolution) networks.
-- Diameter market, which is in its infancy, is rapidly expanding and projected to grow by an average of 42% per year from 2013 through 2017, to reach nearly $1 billion, according to Exact Ventures, allowing Sonus to expand its addressable market by 50% to nearly $3 billion in 2017.
-- Acquisition would expand and diversify Sonus' portfolio with an integrated, virtualized Diameter and SIP-based solution.
-- PT shareholders to receive $3.75 per share in cash. WESTFORD, Mass. & ROCHESTER, N.Y. --
(BUSINESS WIRE)--December 13, 2013-- Sonus Networks, Inc. (NASDAQ:SONS), a global leader in SIP communications, and Performance Technologies, Inc. (NASDAQ: PTIX), a global supplier of advanced, high availability network communications solutions, today announced that they have entered into a definitive merger agreement under which Sonus will acquire PT for $3.75 per share in cash, or approximately $30 million, net of PT's cash and excluding acquisition-related costs.
The acquisition of PT enables Sonus to expand and diversify its portfolio with an integrated, virtualized Diameter and SIP-based solution and deliver strategic value to service providers seeking to offer new multimedia services through mobile, Cloud-based, real-time communications. PT's premier suite of IP-centric SEGway signaling products includes Diameter Signaling Controllers (DSC), which anchor the authentication, authorization and accounting messages sent across mobile networks. As the adoption of the mobile Internet grows, the DSC market is forecast to grow by an average of 42% per year from 2013 through 2017, to reach nearly $1 billion, according to Exact Ventures.
Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, Sonus will acquire all of the outstanding shares of PT for $3.75 per share in cash. The purchase price represents a premium of 25.8% to PT's closing share price of $2.98 on December 12, 2013, and premiums of 25.0%, 26.8% and 26.8%, respectively, to PT's 30-, 60-, and 90-day average closing share prices through December 12, 2013.
Quotes:
"Today's mobile broadband traffic nearly eclipses all Internet activity from just a decade ago, driving the necessity for intelligent and capable Diameter Signaling Controllers that will allow mobile operators to efficiently deploy 4G/LTE," said Raymond P. Dolan, president and chief executive officer of Sonus. "The combination of Sonus and PT allows us to address this significant opportunity by bringing together unique and complementary technologies in wireless and wireline network intelligence, thereby expanding our addressable market by 50% and advancing our mobility and virtualization strategies. The transaction enhances Sonus' best-in-class portfolio, further enabling service providers and enterprises to deliver on the promise of real-time communications."
"Over our thirty-two year history, PT has been recognized for providing mission-critical solutions built on leading-edge technologies designed and supported by some of the best talent in our industry," said John M. Slusser, president and chief executive officer of PT. "The agreement with Sonus provides substantial value to our stockholders as the premium represents an approximately 25% per share premium to our closing stock price as of December 12, 2013. In addition to the financial benefits to our stockholders, in Sonus we find a dedicated team of kindred spirits, highly focused on driving continued growth in the next-generation network communications marketplace. Through this transaction, the value proposition of our broad Diameter and SS7 telecommunications signaling portfolio can be further leveraged and, in combination with Sonus' industry leading SBC and SIP-based product family, it offers an exciting opportunity to provide service providers with a compelling solution set as they architect and provision their networks."
Strategic Benefits:
-- Enhanced Portfolio of Offerings. The acquisition of PT is aligned with Sonus' strategy to offer a portfolio of solutions that enable Cloud-based, real-time, multimedia communications across wireless and wireline networks. As adoption of the mobile Internet grows, Diameter is the IP-based signaling protocol standard that drives authentication, authorization and accounting messages in the IP Multimedia Subsystem (IMS) architecture of wireless 4G/LTE networks. Providing an integrated, virtualized Diameter and SIP-based solution will enable Sonus to offer a more strategic value proposition to service providers seeking to deliver new multimedia services through mobile, Cloud-based, real-time communications.
-- Significant Addressable Market. With 4G/LTE subscriber growth increasing, industry analysts project exponential growth in Diameter traffic to be generated by tablets, smart phones and other mobile devices. The acquisition of PT positions Sonus to capture the significant opportunity this trend presents and should increase Sonus' total addressable market by 50%, from approximately $2 billion to nearly $3 billion in 2017, when combining the SBC and Diameter markets. According to Greg Collins, founder and principal analyst, Exact Ventures, "The Diameter Signaling Controller (DSC) market is still nascent with billions of dollars in revenue opportunity forecast for the coming years."
-- Complementary Assets. The DSC market is a natural extension of the Session Border Controller (SBC) market. SBCs and DSCs both serve as points of entry into core IP networks by providing security, admission control, intelligent routing and interworking capabilities. PT's SEGway Universal Diameter Routers and SS7 Signaling Systems provide tightly integrated signaling and advanced routing that span mission-critical demands of both existing and next-generation 4G/LTE and IMS networks. Additionally, PT's IPnexus Multi-Protocol Gateways and Servers enable a broad range of IP-interworking in data acquisition, sensor, radar and control applications for aviation, weather and other similar infrastructure networks.
Financing and Approvals:
The transaction will be funded using Sonus' existing cash on hand and is expected to be accretive to Sonus' non-GAAP EPS for full year 2015 and mildly dilutive (two cents or less) in 2014. The transaction is expected to close in the first quarter of 2014, subject to PT stockholder approval and the satisfaction of other customary closing conditions.
Guidance:
The company continues to experience solid demand for its current portfolio of products and services. As such, Sonus today is confirming its outlook for the fourth quarter and full year 2013 as provided on July 29, 2013. Sonus expects to provide 2014 guidance, which will include PT's contribution pending the closing of the transaction, when it reports its fourth quarter and full year operating results in February 2014.
Stock Repurchase Program:
As of December 12, 2013, Sonus has repurchased a total of approximately 18 million shares since the inception of its $100 million share repurchase program announced on July 29, 2013 and currently has approximately 267 million shares outstanding following the repurchases. Approximately $43 million remains available for future share repurchases either on the open market or in privately negotiated transactions.
Sonus expects to maintain a strong balance sheet, allowing it to continue to transform its business and invest in compelling growth opportunities, while returning capital to shareholders. The board of directors at Sonus believes that share repurchases represent an attractive investment opportunity and intend to continue to repurchase shares provided market conditions and other factors permit.
Advisors:
Evercore Partners Inc. is serving as Sonus' financial advisor, and Wilmer Cutler Pickering Hale and Dorr LLP is serving as Sonus' legal advisor. Bowen Advisors, Inc. is serving as PT's financial advisor, and Harter Secrest & Emery LLP is serving as PT's legal advisor. Craig-Hallum Capital Group, LLC provided a fairness opinion to PT's board of directors.
Other Facts:
-- PT's SEGway Signaling solutions are deployed in more than one thousand locations globally, serving as a backbone for several premier wireless networks.
-- Featuring a small footprint and high throughput capacity, SEGway is widely recognized as the wireless industry's leading signaling architecture.
-- PT is headquartered in Rochester, NY and maintains direct sales and marketing offices in the U.S. in Raleigh, NC and Chicago, IL and international offices in London, England and Shanghai, China.
-- PT has Centers of Engineering Excellence in San Diego, CA, Kanata, Ontario, Canada and Rochester, NY.
-- PT has a global installed base of more than 1,000 signaling system installations.
-- The number of 4G-LTE connections worldwide is forecast to pass one billion by 2017, according to a new study by GSMA Intelligence.
-- For two consecutive years, Sonus has been positioned in the Leaders quadrant of the "Magic Quadrant for Session Border Controllers" and was the largest gainer in the October 21, 2013 report by Gartner, Inc.
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