April 23, 2004 Oakland, CA -- Zhone Technologies, Inc. will acquire Sorrento Networks Corp., a provider of networking products for metro-optical transport and access. The acquisition of Sorrento expands Zhone's customer base with the addition of some of the world's largest cable operators and carriers and adds new access and transport offerings. Sorrento's product portfolio has immediate application at both existing accounts as well as in greenfield deployments by delivering converged VoIP, broadband access, video services, and transport protocols over their existing infrastructures, according to a Zhone press statement.
Zhone will issue 0.9 of a share of Zhone common stock for each outstanding share of Sorrento common stock. Each option, warrant, and other security exercisable or convertible into Sorrento common stock will be assumed by Zhone and become exercisable or convertible into Zhone common stock, with appropriate adjustments based on the merger exchange ratio. The proposed stock-for-stock transaction is intended to qualify as tax-free to the stockholders of Sorrento.
"This acquisition positions Zhone as a leading provider of access and metro-optical transport solutions to telecommunications and cable operators worldwide," says Mory Ejabat, chairman and chief executive officer of Zhone. "This transaction expands Zhone's presence among both telephone carriers and cable MSOs as their needs converge towards packet-based voice/data/video total-delivery systems. Combining the two businesses extends Zhone's solution offerings to include metro-optical transport for our telecom carrier customers and allows us to market our VoIP and access solutions into the cable MSOs. Additionally, we anticipate that, excluding any acquisition related charges, the acquisition will be immediately accretive and will provide for substantial cost savings from the reduction of operating expenses."
"The addition of Sorrento's DWDM and CWDM products to Zhone's comprehensive product portfolio creates a whole greater than the sum of its parts," said Phil Arneson, chairman and chief executive officer of Sorrento. "We believe that Zhone has the infrastructure and assets to extend Sorrento's leadership in the telecommunications industry. Zhone's solid revenue performance, broad customer base and strong balance sheet are ingredients for continued success. This transaction advances Mory's vision and determination to make Zhone a comprehensive provider of next generation access network solutions."
The combined company will have a customer base that includes some of the world's largest carriers representing more than 300 existing carrier and cable MSO customers on six continents. The combined company will deliver a broad array of products for access and metro-optical network applications, with employees operating in 15 countries around the globe.
The transaction is subject to the approval of each company's stockholders, regulatory review as well as other customary closing conditions. The transaction is currently expected to close in the summer of 2004. The time, location and other details regarding each company's stockholder meeting will be communicated to stockholders at a later date.
Sorrento retained Needham & Company as its financial advisor and Stradling Yocca Carlson & Rauth as its legal advisor. Zhone enlisted the assistance of Thomas Weisel Partners to facilitate the transaction. Latham & Watkins served as Zhone's legal advisor in the transaction.