January 6, 2006 Quebec City, Canada -- EXFO Electro-Optical Engineering has signed an agreement to acquire substantially all the assets of Consultronics, including the shares of this company's subsidiaries in the United Kingdom and Hungary, in an all-cash transaction valued at $17.7 million. EXFO will also assume approximately $0.5 million in net debt from Consultronics and incur approximately $ 1.6 million in other acquisition-related costs for a total purchase price of $19.8 million.
Consideration paid may vary according to the carrying value of the assets on the closing date of the acquisition, which is slated for mid-March. The deal is expected to be neutral on a GAAP basis for the remainder of fiscal 2006 and accretive in fiscal 2007, taking into account approximately $2.0 million per year in additional amortization of intangible assets.
Consultronics, a privately held company founded in 1973 with headquarters/operations in Toronto as well as operations in Southampton, UK, and Budapest, Hungary, is a vendor of copper-based broadband access test equipment. The company ranks among the top three vendors in handheld x-Digital Subscriber Line (xDSL) testing with a global market share of 13.4%, according to an industry report from Frost & Sullivan. The company also supports product portfolio for testing next-generation technologies, such as IPTV (Internet Protocol TV) and VoIP (Voice-over-Internet Protocol), for network service providers in their deployment of triple-play services (voice, data, video) over optical and copper links in access networks. Other test solutions offered by Consultronics include network monitoring probes for VoIP and legacy telephone networks, Gigabit Ethernet/Ethernet analyzers for remote testing applications, and protocol and physical characterization instruments for local copper loops.
"This acquisition is a highly strategic initiative to position EXFO as a genuine one-stop shop for broadband access and triple-play testing, since it greatly complements our market leadership in the FTTx market," comments Germain Lamonde, EXFO's chairman, president, and CEO. "Consultronics' strong product offering in handheld xDSL, IPTV, and VoIP testing, combined with our leadership position in portable optical testing, will provide customers with a comprehensive suite of test solutions for triple-play deployments that is unmatched in our industry. Ultimately, we believe the accretive nature of this deal, along with the strong inherent synergies involving sales channels, customer relationships and new test solutions, will increase shareholder value."
According to a press release, Consultronics generated sales of $15.3 million and an EBITDA of $1.3 million for the 12 months ended November 30, 2005. The company's operations, which include approximately 130 employees worldwide, will be integrated into EXFO's Telecom division.
The acquisition has been approved by the board of directors of both companies, and is subject to customary closing conditions.