ADTRAN, Inc. of Huntsville and German-based ADVA on Tuesday announced an agreement to combine the two companies and create a leading global, scaled provider of end-to-end fiber networking solutions for communications service provider, enterprise and government customers.
The merger combines ADTRAN’s global leadership in fiber access, fiber extension and subscriber connectivity solutions with ADVA’s global leadership in metro wavelength division multiplexing, data center interconnect, business ethernet and network synchronization solutions.
Both companies are pioneers in open, disaggregated solutions with a shared vision for the future of fiber networking. The combined business will offer a comprehensive portfolio for providing homes, businesses and 5G infrastructure with scalable, secure and assured fiber connectivity, paired with cloud-managed Wi-Fi connectivity and SaaS applications that optimize the performance of the network and improve the customer experience.
“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.
Stanton said by joining forces, the combined firm’s portfolio will better position each company 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,” Stanton added.
ADVA CEO Brian Protiva said, “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. 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.”
The combination of ADTRAN and ADVA is expected to create significant value for the shareholders of both companies, with approximately $52 million in pre-tax annual cost synergies realized within two years post-closing, driven by identified supply chain efficiencies and operating model optimization.
Importantly, the combination will create opportunities to better serve customers. This will enable the combined company to accelerate its growth profile by utilizing a broader regional presence and the enhanced cross-selling opportunities facilitated by complementary product lines.
ADTRAN and ADVA will combine under a new holding company (which will be renamed ADTRAN Holdings, Inc. following the closing) pursuant to an all-stock exchange offer for 100 percent of ADVA’s outstanding shares.
Under the terms of the offer, each ADVA share will be exchanged for 0.8244 shares of common stock in the new holding company. The offer is equivalent to €14.98 per ADVA share based on ADTRAN’s 3-month VWAP as of August 27, 2021, representing a premium of 22% to ADVA’s 3-month VWAP for the same time period, an equity value of €789 million, and an enterprise value of €759 million for an implied multiple of 1.3x LTM Revenue. ADTRAN shares will be exchanged for shares in the new holding company on a one-for-one basis. At the closing, ADTRAN shareholders will own approximately 54% of the equity of the combined company and ADVA shareholders will own approximately 46%, assuming a tender of 100% of ADVA shares.
The agreement has been approved unanimously by the ADTRAN Board of Directors and the ADVA Management and Supervisory Boards.
The combined company will be named ADTRAN Holdings, Inc. Its global headquarters will be located in Huntsville, AL, and its European headquarters will be in Munich, Germany.
The new management team and Board of Directors will have a balanced mix of executives from both companies. ADTRAN’s Chairman and CEO, Tom Stanton, will serve in the same capacity following the close of the transaction. ADVA’s CEO, Brian Protiva, will transition into the role of executive vice chairman. ADTRAN’s CFO, Mike Foliano, will remain in his current role and ADVA’s CTO, Christoph Glingener, will serve in the same capacity for the combined entity.
The combined company will be dual-listed on the NASDAQ and Frankfurt Stock Exchange. The combination expands product offering and strengthens position as a global fiber networking innovation leader with combined revenue of $1.2 billion.
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