NEW YORK, Feb 26 (Reuter) - The proposed $6.6 billion
merger between 3Com Corp and U.S. Robotics Corp (NASDAQ:USRX) is
expected to be slightly dilutive to 3Com's and U.S. Robotics's
combined earnings, but any slight dilution will be offset by
expected cost savings from the merger, the companies said.
"When you combine the current average earnings estimates
(on Wall Street) and recalculate the shares outstanding, you
will find some slight dilution (to earnings from the merger),"
said Chris Paisley, 3Com's chief financial officer, on a
conference call with analysts and reporters.
On a fully-diluted basis, the merger is worth $7.3 billion,
executives said in the call.
3Com said it will issue 156 million shares to acquire all
the outstanding 89.1 million shares of U.S. Robotics, plus over
time it will issue another 132 million shares to acquire U.S.
Robotics options.
The executives said that the ratio of the deal, whereby
each share in U.S. Robotics will be exchanged for 1.75 shares
of 3Com's stock, is a "fixed exchange ratio" that will not be
affected by any fluctuations in either company's stock price.
While the two networking companies did not give many
immediate details about where the cost savings will come from,
they said that U.S. Robotics will clearly take the lead in the
area of remote access technology, through its leading position
in high speed modems.
"(Our) investments in remote access technology can be
clearly consolidated into U.S. Robotics' investments," said
3Com Chairman and CEO Eric Benhamou, adding that U.S. Robotics'
investments in cell switching and frame switching technology
can be consolidated into 3Com's ongoing investments in
switching technology.
"At a time when the market is consolidating around a few
core leaders, the strength of 3Com and U.S. Robotics is
unequalled," Benhamou said during the conference call. The
remaining company will retain the 3Com name, with more than
12,000 employees and more than $5 billion in revenues.
"Together, from the user perspective, 3Com and U.S.
Robotics are delivering rich end-to-end connectivity solutions
across LANS (local area networks) and WANS (wide area
networks)," Benhamou said, referring to a departmental or
single location corporate network (LAN) and a network that
includes multiple or even international network locations.
Reuters News Service |
