Nortel Networks and Architel Systems Corporation announced an agreement whereby Nortel Networks will acquire all of the common shares of Architel, a leader in software systems that allow service providers to rapidly provide Internet and other next-generation Internet Protocol (IP) services, for an estimated US$395 million in Nortel Networks common shares.
With the acquisition of Architel, Nortel Networks will expand its Preside portfolio to become the key enabler of next-generation Internet services promised by the Internet. Service providers will be able to deliver value-added Internet services to businesses and consumers with greater speed, quality, and reliability.
Preside is a key element of the high-performance Internet, providing a critical foundation for the coming tidal wave of eBusiness and other Internet applications. Preside will enable applications like virtual private networks (VPNs) or eBusiness websites to work seamlessly with any connection medium, optical, cable, wireless or high-speed Digital Subscriber Link (DSL) service allowing service providers to offer a one-stop shop in delivering bundled services to businesses and consumers.
Architel’s software will become a key component of Preside. It will automate the service provisioning process, enabling service providers to provision and activate services for individual customers in minutes, instead of the weeks or months it takes in many networks. Architel’s solutions maximise the return of new services such as high-speed DSL service, voice over DSL, hosted applications, multimedia applications, and virtual private networks.
‘Nortel Networks is a great strategic fit for Architel,’ said Stuart Griffith, president and CEO of Architel. ‘Architel is very focused on building next-generation service delivery solutions for the largest carrier-grade IP networks, and we see Nortel Networks global reach, marketing and sales power as the best way to leverage those capabilities. ‘
Nortel Networks will exchange 0.21 of a common share for each Architel share on a fully-diluted basis, resulting in Nortel Networks issuing approximately 3.63 million common shares on a fully-diluted basis. At closing, however, if the value of Nortel Networks common shares is below US$83.81, Nortel Networks will pay US$17.60 in Nortel Networks common shares for each share of Architel, on a fully-diluted basis. If the value of Nortel Networks common shares is above US$125.71, Nortel Networks will pay US$26.40 in Nortel Networks common shares for each Architel share, on a fully-diluted basis.
The transaction, which is expected to close in early third quarter of 2000, is subject to customary regulatory approvals, court approval, and approval by Architel’s shareholders. It is expected to be neutral to Nortel Networks earnings per share in calendar year 2000 and slightly accretive in calendar year 2001 (excluding acquisition-related charges).
The board of directors of both companies have approved the transaction. If the transaction fails to proceed in certain circumstances, Nortel Networks will be entitled to receive either a US$12 million termination fee or the benefits of an option to acquire a 19.9% common share interest in Architel.
Nortel Networks are at www.nortelnetworks.com
Architel are at http://www.Architel.com.