February 19, 2004 Linthicum, MD--CIENA released its 1st quarter earnings today, and announced two acquisitions in the broadband equipment arena, Catena Networks and Internet Photonics.
Privately-held Catena Networks will be acquired for approximately 77.5 million shares of CIENA common stock which, based on the closing price of CIENA's stock on February 18, 2004, have an aggregate value of approximately $486.7 million. Catena Networks is in the broadband access market and has deployed more than 5500 integrated broadband access solutions with regional Bell operating companies (RBOCs), independent operating companies (IOCs) and competitive local exchange carriers (CLECs). Their customer list includes the three largest RBOCs, including BellSouth. Catena Networks has offices in Ottawa, Ontario and Research Triangle Park, NC.
"The combined companies will have a very attractive solutions portfolio," said Bill Smith, chief technology officer at BellSouth, which has deployed Catena's broadband access systems throughout its nine-state operating area. "We remain committed to accelerating the delivery of high-value broadband services to our subscribers, and this move will give Catena the resources to continue to develop and enhance its products to support our plans."
"A key element of CIENA's strategy is to drive future revenue and earnings by taking steps to expand our addressable market and the set of solutions we offer our customers," said Gary Smith, CIENA's president and chief executive. "By joining forces with Catena Networks, an acknowledged broadband access leader with meaningful revenue and a significant and complementary customer base, we accelerate CIENA's path to profitability. We also gain access to a market that is expected to benefit as service providers shift spending to target the access portions of their networks, building out DSL and fiber-based access."
Under the terms of the acquisition agreement, Catena Networks will merge into CIENA, and all the outstanding shares of Catena common and preferred stock will be exchanged for shares of CIENA common stock. CIENA also will assume Catena's employee stock options and warrants which will be converted into options and warrants to purchase CIENA shares. The total number of shares issuable in respect of Catena outstanding stock, options and warrants is approximately 77.5 million shares of CIENA common stock which, based on the closing price of CIENA's stock on February 18, 2004, have an aggregate value of approximately $486.7 million.
CIENA expects the transaction to qualify as a tax-free reorganization. This transaction is subject to various conditions and approval by appropriate government agencies and the stockholders of Catena. The boards of directors of both CIENA and Catena Networks each have approved the transaction. It is expected that this transaction will close by the end of CIENA's third fiscal quarter 2004. For accounting purposes, the value of the transaction will be determined using a five-day average of CIENA's common stock's closing price beginning on February 17, 2004.
Following completion of the transaction, Catena Networks will form CIENA's Broadband Access group, led by Jim Hjartarson, former president and CEO of Catena, and be based in Ottawa.
Morgan Stanley served as financial advisor to CIENA on this transaction. Goldman Sachs served as financial advisor to Catena.
Separately today, CIENA also announced its intent to acquire Internet Photonics, a privately-held supplier of carrier-grade optical Ethernet transport and switching solutions. This is also a stock-for-stock deal and based on the average closing price of CIENA common stock for the ten trading days prior to the signing of the merger agreement, the number of CIENA shares to be issued is 24.4 million, and the value of the transaction is approximately $150 million. The acquisition of Internet Photonics expands CIENA's solution portfolio targeting multiple system operators (MSOs) and traditional carriers with the addition of a flexible platform for carrier-grade Gigabit Ethernet solutions.
CIENA expects to be able to capitalize on Internet Photonics' substantial momentum with the MSOs. Their customers include six of the top ten cable operators in the U.S., including significant deployments by Cablevision and Adelphia.
Under the terms of the acquisition agreement, Internet Photonics will merge into CIENA, and all the outstanding shares of Internet Photonics common and preferred stock, and employee stock options will be exchanged for shares of CIENA common stock. Based on the average closing price of CIENA common stock for the ten trading days prior to the signing of the merger agreement, the number of CIENA shares to be issued is 24.4 million, and the value of the transaction is approximately $150 million. Internet Photonics' employee stock options will be converted into options to purchase CIENA shares.
CIENA expects the transaction to qualify as a tax-free reorganization.
This transaction is subject to various conditions and approval by appropriate government agencies. The boards of directors of both CIENA and Internet Photonics, and a majority of the Internet Photonics' shareholders have approved the transaction. It is expected that this transaction will close by the end of CIENA's third fiscal quarter 2004. For accounting purposes, the value of the transaction will be determined using a five-day average of CIENA's common stock's closing price beginning on February 17, 2004.
Following completion of the transaction, Internet Photonics will become part of CIENA's Metro and Enterprise Solutions group and will continue to operate from its Shrewsbury, N.J. and Marlborough, Mass. locations.
Morgan Stanley served as financial advisor to CIENA on this transaction. CSFB served as financial advisor to Internet Photonics.