The sagging stock market is partly to blame for another telecommunications snafu as Western Multiplex Corp. and wireless broadband equipment manufacturer Adaptive Broadband Corp. announced last week that Western Multiplex’s planned acquisition of Adaptive Broadband for approximately $645 million has been terminated.
“The fixed-wireless industry currently is experiencing weakness in the U.S. and financing is eroding for emerging carriers. From a stock market point of view, fixed wireless specifically, and telecommunications stocks, in general, have really taken a beating, making it very difficult to put a monetary valuation on the transaction at this time,” said Daniel Scharre, president and chief executive officer of Adaptive Broadband.
Jonathan Zakin, chairman and CEO of Western Multiplex, said both parties agreed the merger termination was “in their best interests.”
Adaptive Broadband “has a lot of work to do to stabilize themselves,” said Nancy Huber, chief financial officer of Western Multiplex, and given the current financial conditions, the two companies could not get together on a price.
Under terms of the original agreement announced Nov. 13, Adaptive Broadband shareholders were to receive a fixed exchange ratio of 1.345 Western Multiplex shares for each share of Adaptive Broadband. Based on Western Multiplex’s closing price of $12.75 on Nov. 10, that represented a price of approximately $17.15 per Adaptive Broadband share.
Since that time, the share value of both companies has steadily declined. Western Multiplex was trading at $8.18 and Adaptive Broadband was trading at $3.75 at RCR Wireless News press time.
The deal collapse did not come as a surprise to analysts. Adaptive Broadband lowered its expectations for its fiscal-year 2001 second quarter ended Dec. 31 to $8 million from an anticipated $31 million due in part to recent developments between the company and Fuzion Technologies Inc. that caused a delay in a $13 million shipment and a delay in the payment to Adaptive Broadband for a $12 million overdue receivable from a subsidiary of Fuzion.
In response to the recent developments, Adaptive Broadband’s Scharre was promoted from chief operating officer to CEO, and Frederick D. Lawrence resigned as the company’s chairman, retiring immediately instead of in July as previously planned, Adaptive Broadband said.
Huber said Western Multiplex will continue to pursue other consolidation opportunities, and its agreement with Adaptive Broadband does not preclude the companies from merging at some point in the future.
