Stratus Computer Inc. and Ascend Communications Inc., which makes wide area networking solutions for telecom carriers and Internet service providers, announced plans to merge in a tax-free stock-for-stock exchange valued at about $822 million.
The boards of directors of both companies have approved the planned purchase, which calls for each share of Stratus to be traded for 0.75 shares of Ascend. The transaction’s value is based on Ascend’s closing price July 31 of $33.35 per share.
“Ascend has stepped up over the last few years and made it clear they plan to be a major player in the central office,” said Craig Marino, principal of Broadview. “Stratus is a very good company with good products … (that was) blind-sided by the Asian economic crisis. They lost something like 20 percent of revenue as a result of (the) Asian crisis. It hammered their stock.”
Stratus is divided into four business units: Telecom Carrier; Enterprise Computer; and two business units comprising Financial and Enterprise Software. Ascend said it plans to set up the non-telecom divisions as separate subsidiaries to be divested before the end of the year.
Lucent Technologies Inc. has been mentioned as a potential buyer of Ascend, especially since it now could account for such a transaction as a pooling of interests. While not commenting specifically about the Lucent rumor, Harvey Goldman, senior partner of Steel, Hector & Davis L.L.C. said: “You can extrapolate or project a number of other acquisitions in the industry by looking at the characteristics of the players in this merger.”