Enterasys Enters New Phase in Private

By Colin C. Haley

November 14, 2005

The network equipment maker agrees to a $386M buyout from a group of investment firms.

Enterasys , one of four firms that spun out of network equipment pioneer Cabletron Systems in 2000, is being bought by a group of investment firms for $386 million.

The maker of switches, routers, local area networks and security systems announced the sale to a consortium led by Gores Group and Tennebaum Capital this morning. The price, which works out to $13.92 per share, represents a 32 percent bump over the stock's Friday closing price.

"Both [Gores and Tennebaum] have a successful track record of working with companies to grow in the technology space," Mark Aslet, Enterasys CEO, said on a conference call.

In addition to giving the company the tools to continue growing on its own, Aslet said the new owners have the capital needed to help Enterasys grow through acquisition.

For the last several years, networking giants with deeper pockets than Enterasys have been buying smaller companies to add complementary products and technologies.

For example, Juniper today announced that it will pay $122 million for security specialist Funk Software.

Cisco has also been a buyer, picking up firms that specialize in Voice over IP and other emerging areas.

The company's current senior managers will continue to lead Enterasys, and its corporate headquarters will remain in Andover, Mass., Aslet said.

The buyout has been unanimously recommended by Enterasys directors. The deal requires approval from shareholders and regulators and is expected to close during the first quarter, after which Enterasys will become a privately held company.

Gores executives said Enterasys has the qualities it looks for in a purchase, including a strong technology, employees, management team and customer base.

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