Tellabs nabs AFC for $1.9 billion

May 20, 2004 Naperville, IL, and Petaluma, CA -- Bandwidth management and optical transport provider Tellabs has entered into a definitive agreement to acquire access provider AFC in a deal worth $1.9 billion.

May 20th, 2004

May 20, 2004 Naperville, IL, and Petaluma, CA -- Bandwidth management and optical transport provider Tellabs has entered into a definitive agreement to acquire access provider AFC in a deal worth $1.9 billion.

Under the terms of the transaction, which was approved by both companies' boards of directors, AFC stockholders will receive 1.55 shares of Tellabs common stock and $7.00 in cash for each AFC share. Based on Tellabs' closing price on May 19, 2004, this represents $21.24 in value per AFC share, or a total value of $1.9 billion. Upon completion of the transaction, Tellabs stockholders will own approximately 75% of the company and AFC stockholders will own 25%. Including synergies, the transaction is expected to be accretive to Tellabs' 2005 pretax income on a per-share basis, excluding amortization associated with acquired intangibles and other purchase accounting adjustments.

"Together, Tellabs and AFC create a strategic global telecom equipment supplier that will lead the industry's shift to broadband data with end-to-end access and transport solutions," asserts Krish Prabhu, CEO and president of Tellabs. "Marrying the leader in access with the leader in transport positions us to grow with our customers in the industry's sweet spot of broadband services. This will enable us to help customers simplify networks, offer easier service provisioning, and sharpen their competitive edge."

"We are excited about this strategic combination, which creates a company with an expanded portfolio to take advantage of carriers' growing investment and focus on alternative broadband access markets such as fiber-to-the-premises and broadband wireless," adds John Schofield, chairman and CEO of AFC. "Our comprehensive suite of innovative broadband access solutions will gain growth opportunities through Tellabs' significant international distribution channels, as well as their deep relationships with regional Bells and large incumbent carriers."

Upon completion of the transaction, John Schofield will become chief operating officer and a director of Tellabs. The Tellabs board will be expanded to include three AFC directors, including Schofield, increasing the size of Tellabs' board to 12 members. The transaction is subject to certain closing conditions, including regulatory approval and approval by Tellabs' and AFC's stockholders. It is expected to close in the second half of 2004.

The combined company will employ about 4,100 people, including nearly 1,000 in international locations. It will have research and development centers in Illinois, California, Florida, Texas, Virginia, Denmark and Finland, as well as 41 sales offices in 29 countries.

Credit Suisse First Boston acted as financial advisor to Tellabs, and Sidley Austin Brown & Wood provided legal counsel to Tellabs. Bear, Stearns & Co. Inc. acted as financial advisor to AFC, and Pillsbury Winthrop provided legal counsel to AFC.

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