Proxim Buys Agere's Wi-Fi Products
June 17, 2002
A deal for $65 million puts Proxim in control of Agere's Wireless LAN equipment business, including the ORiNOCO line of products. Agere keeps the chips.
Looking to concentrate business in the semiconductor area of WLANs, Allentown, PA-based Agere Systems has agreed to sell its 802.11 equipment business, including the ORiNOCO line of products, to Proxim Corporation of Sunnyvale, CA for $65 million in cash.
Agere will retain its core business of chips, modules and card components.
Proxim's take will include all WLAN products Agere made for homes and SOHOs, on up to equipment for ISPs and outdoor use, including access points, broadband gateways,, the radio back bone, and the ORiNOCO branded client card business.In a conference call this morning, Proxim chairman and CEO Jonathan Zakin said, "The transaction with Agere broadens and expands our capabilities in the mobile wireless backhaul marketplace, last mile access, home networking, campus connectivity (both WAN and LAN side), and it adds depth and breadth to our technology portfolios, primarily in extreme broadening of our software portfolios, complimenting our hardware capabilities."
Once the transaction closes, Proxim expects to see an immediate revenue increase over the first two quarters. The deal can't take place until it gets regulatory approval -- the companies expect that to take 60 days, sometime in the third quarter.
To finance the acquisition, Proxim has received a collective investment of $75 million from Warburg Pincus and Broadview Capital Partners. In return each will get approximately $41 million worth of convertible preferred stock, worth a conversion price of $3.06 per share. The remaining $34 million will convert to stock based on stockholder approval. This will represent about 28% of Proxim's shares outstanding. Approval will likely happen three months after the transaction closes in a special meeting Proxim expects to hold; the company's largest stock holders, CEO Zakin and Ripplewood Holdings LLC, have already agreed to it. They control 32% of the vote.
Agere and Proxim are also entering a three year strategic partnership where they will have a patent cross license to share information -- including the patent-related litigation they currently have going on. Agere will provide chips and modules for Proxim's future 802.11-based products.
Zakin concluded, "The transaction will provide us with scale and synergies in cross selling of each others products, expansions of our markets (particularly in Latin America and the Far East), and the ability to get products to market six to nine months sooner that are integrated between low-cost last-mile access using 802.11a and b technologies with our spread spectrum backhaul technologies."