August 29, 2005 Minneapolis, MN -- ADC today announced it has completed its acquisition of Fiber Optic Network Solutions (FONS), a manufacturer of high-performance passive optical components and fiber-optic cable packaging, distribution, and connectivity platforms.
The acquisition was completed for approximately $172 million in cash. This amount is inclusive of a retention bonus pool that will be paid to most of FONS' current employees. FONS has approximately 60 employees worldwide and estimated calendar 2005 sales of $95 million. In addition to a facility in Marlboro, Massachusetts, the company has strategic partnerships and outsourcing relationships in countries including Mexico, Japan and China.
With the addition of FONS, ADC says it now becomes among the largest suppliers of FTTX products in the U.S., according to proprietary market share estimates. According to a press release, the acquisition approximately doubles ADC's FTTX outside plant business to greater than 10% of total ADC sales, and will be accretive to earnings per share, excluding acquisition-related charges, acquired intangibles amortization, and FONS employee retention payments.
"ADC's acquisition of FONS is strategically important as equipment vendors continue to consolidate in the industry," contends Matt Davis, director of Broadband Access Technologies for the Boston-based Yankee Group. "As they were, both entities gained considerable market penetration as fiber deployments began to ramp up in 2004 and deployments continue to broaden today. The combination makes sense as service providers look to equipment providers that can quickly scale to enable mass-market deployments."
ADC expects to take a charge for various acquisition-related expenses the amount of which has not been determined. Excluding the charge, amortization of acquired intangibles, and scheduled payments of a FONS employee retention pool, ADC expects the acquisition to be around $0.00-$0.01 accretive to diluted earnings per share from continuing operations in its fiscal fourth quarter ending October 31, 2005, and around $0.05-$0.10 accretive to diluted earnings per share from continuing operations in fiscal 2006.
"We are excited to add the innovative technologies that FONS has developed into our portfolio of FTTX solutions," comments Robert E. Switz, president and CEO of ADC. "As a combined company, we can more fully leverage our strengths to deliver on customer demands for fiber in the central office, the outside plant, and at the customer premises. In addition, the acquisition enhances our capabilities to capitalize on an FTTX market that has significant future growth potential."
ADC says its OmniReach platforms are designed to meet the unique requirements of FTTX networks. According to the company, by building network infrastructures using the platforms, service providers can accelerate deployments while maximizing operational efficiencies from the central office to the outside plant. Through its professional services organization, the company also aids in the planning, deployment, and maintenance of FTTX networks.