ADC to acquire the KRONE Group
March 25, 2004 Minneapolis, MN -- ADC has announced an agreement to acquire the KRONE Group, global supplier of copper- and fiber-based connectivity solutions and cabling products used in public access and enterprise networks by many of the world's leading organizations.
March 25, 2004 Minneapolis, MN -- ADC has announced an agreement to acquire the KRONE Group, global supplier of copper- and fiber-based connectivity solutions and cabling products used in public access and enterprise networks by many of the world's leading organizations, from GenTek Inc.
"This is an ideal acquisition and a perfect fit with ADC's new strategic initiative to become the leader in global network infrastructure solutions and services," explains Robert E. Switz, president and CEO of ADC. "This is the first major step we are taking to fulfill the growth plans we outlined over the last several months. With the addition of KRONE, we further establish ADC as a leader in network infrastructure, a core strength area where we have a proven record of success. Ultimately, our customers benefit from this combination."
Through the combination of ADC and KRONE product lines, people and facilities, ADC believes it will quickly achieve a larger global scale and presence in supplying global network infrastructure solutions, including:
• Worldwide market leadership in copper and fiber central office infrastructure technology;
• Diversified global customer base serving nearly every major communications service provider worldwide;
• Leading market share in the enterprise structured cabling systems market via KRONE's advanced products;
• Accelerated entry into the emerging growth markets of China, India, Russia, Eastern Europe, and Southeast Asia;
• Broader product portfolio with a worldwide opportunity to cross-sell and up-sell existing and upcoming products; and
• Competitive cost leadership through global manufacturing, engineering, and supply chain management.
"ADC's new Global Network Infrastructure strategy includes the products, systems and services that provide the foundation for every type of communications network over every medium: fiber, copper, coaxial, and wireless," adds Switz. "The intent of our strategy is to enable all of our customers--wireline, wireless, cable, broadcast, and enterprise--to profitably deploy every type of broadband service offering and application."
The proposed acquisition is valued at approximately $350 million, in which ADC will pay cash of approximately $291 million and assume certain defined liabilities consisting principally of KRONE's pension obligation for its German workforce. The transaction is expected to close during ADC's third quarter ending July 31, 2004. Closing of the transaction is subject to approval by necessary regulatory authorities as well as customary closing conditions. After closing the transaction, ADC expects to take a charge for various acquisition-related expenses the amount of which has not been determined. Excluding the charge and amortization of acquisition-related intangibles, ADC expects the acquisition to be accretive to earnings per share in 2004. Booz Allen Hamilton has been retained by ADC to assist in integrating the two companies toward ADC's expectation of driving significant and sustainable value from this combination.
KRONE offers a complete line of copper- and fiber optic-based cabling and connectivity systems. Since its initial offering of distribution frames and cable connection hardware more than 70 years ago, KRONE's product lines and customer base have seen significant growth. With more than 2,000 employees, eight factories, and five research and development centers around the world, KRONE has representation in more than 140 countries to supply communications service providers and enterprises. Based on unaudited numbers, KRONE had sales of $316 million, operating income of $13 million before restructuring and impairment charges, and depreciation and amortization expense of $14 million in the year ended December 31, 2003 compared to 2002 annual sales of $267 million resulting in an operating loss of $10 million before restructuring and impairment charges, and depreciation and amortization expense of $14 million.