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ADTRAN (NASDAQ:ADTN) and ADVA (OTCPK:ADVOF) have agreed to merge their businesses, resulting in a global leader in fiber optic networking with combined revenues of $1.2 billion. The deal should be completed in the second or third quarter of next year.
Pursuant to an all-stock exchange offer for 100 percent of ADVA’s outstanding shares, ADTRAN and ADVA will merge under a new holding company. The new holding will be called ADTRAN Holdings, Inc. after the closure.
The merged firm will be traded on both the NASDAQ and the Frankfurt Stock Exchange.
Each ADVA share will be swapped for 0.8244 shares of common stock in the new holding company under the terms of the deal. Based on ADTRAN’s 3-month VWAP as of August 27, 2021, the offer is equivalent to €14.98 per ADVA share, representing a 22 percent premium to ADVA’s 3-month VWAP for the same time period. It has an equity value of €789 million, and an enterprise value of €759 million for an implied multiple of 1.3x LTM Revenue.
On a one-for-one basis, ADTRAN shares will be swapped for shares in the new holding company. ADTRAN shareholders would control about 54 percent of the merged company’s stock at completion, while ADVA owners will own approximately 46 percent, assuming 100% tender of ADVA shares.
The businesses said the merger will take advantage of the companies’ trusted supplier status with communications service providers to build a more expansive, secure, and comprehensive portfolio for government networks and critical infrastructure.
The merged business will continue to service all clients in its present markets and will have access to world-class research and development teams to help create the “next generation” of fiber communications networks.
“The business combination is an outstanding opportunity to leverage the complementary nature of our customers and product portfolios and the compatibility of our companies’ businesses and culture,” said ADVA CEO Brian Protiva. “We are excited to join forces and create a world-class team with exceptional technology expertise and customer focus. Our shared vision and passion for innovative networking solutions will benefit our customers through an enhanced value proposition, including a fully integrated end-to-end architecture for enterprise, access and metro core markets.”
A fair mix of professionals from both businesses will make up the new management team and Board of Directors. Tom Stanton, the Chairman and CEO of ADTRAN, will remain in his position upon the transaction’s completion. Brian Protiva, the CEO of ADVA, will be promoted to Executive Vice Chairman. Mike Foliano, ADTRAN’s CFO, will continue in his present position, while Christoph Glingener, ADVA’s CTO, will serve in the same capacity for the merged business.
The merged company’s Board of Directors will consist of 9 directors, 6 of whom will be ADTRAN-designated directors and 3 of whom will be ADVA-designated directors.
“We are in the early stages of an unprecedented investment cycle in fiber connectivity, especially in the U.S. and Europe, fueled by the demand for last-mile fiber access and middle-mile transport to provide high-speed connectivity to homes, businesses and future 5G infrastructure,” said ADTRAN Chairman and CEO Thomas Stanton. “By joining forces, our combined firm’s portfolio will better position us to capitalize on this highly compelling global opportunity. We expect the transaction will create significant long-term value for both companies’ stakeholders by increasing our scale and improving our ability to serve as a trusted supplier for customers worldwide.”