In pursuit of a more consolidated fixed-wireless infrastructure industry, Western Multiplex Corp. entered an agreement last week to acquire Adaptive Broadband Corp. for $645 million in stock.
“The combination of Western Multiplex and Adaptive Broadband creates the broadest-based wireless infrastructure company in the world,” said Jonathan Zakin, chairman and chief executive officer of Western Multiplex. ” … The combined company will now be able to offer point-to-point and point-to-multipoint products for last-mile access, campus and enterprise connectivity and wireless access backhaul.”
Under terms of the agreement, Adaptive Broadband shareholders will receive a fixed exchange ratio of 1.345 Western Multiplex shares for each share of Adaptive Broadband stock. Based on Western Multiplex’s closing price of $12.75 on Nov. 10, this represents a price of approximately $17.15 per Adaptive Broadband share, the companies said.
Shares of Western Multiplex dropped 19.6 percent, or $2.50, to $10.50 in the hours following the announcement last Monday. Shares of Adaptive Broadband jumped 5 percent to $13.44. Shares of both companies then declined during the next several days. Western Multiplex was trading at $8.50 and Adaptive Broadband was trading at $10.94 at RCR Wireless News press time.
Analyst firm Tucker Anthony Capital Markets lowered its recommendation on Adaptive Broadband to “market perform” from “strong buy.” Tucker Anthony said going forward, it sees a big risk in combining the two companies while Adaptive Broadband tries to close on some of the market access agreements the company has been pursuing with original equipment manufacturers like Alcatel. Several firms, including Lehman Brothers and Salomon Smith Barney Inc., issued a “strong buy” rating on Western Multiplex.
Zakin emphasized the combined company now will be able to address a variety of equipment needs.
“This transaction is the first step toward the consolidation of the wireless infrastructure industry, which is both fragmented and niche-oriented,” Zakin said. “It reinforces our belief that to best serve our customers, we need to provide full end-to-end wireless connectivity from the side of the Internet cloud or fiber ring to an end user’s home or office.”
Western Multiplex’s products are primarily lower-capacity, point-to-point radios designed to operate in unlicensed spectrum. Adaptive Broadband’s products are generally higher-capacity, point-to-multipoint unlicensed radios. Recently both companies have been moving toward manufacturing equipment for licensed frequencies.
Zakin will remain chairman and CEO of the combined company. Following the close of the transaction, Frederick Lawrence, Adaptive Broadband’s chairman and CEO will become a member of the new board of directors. Adaptive Broadband president and chief operating officer Daniel Scharre will join Western Multiplex as president and COO and also will serve on the board of directors, Western Multiplex said.
Both companies are based in Sunnyvale, Calif.
The transaction is expected to close during the first quarter of next year.
