MARTINSRIED and MUNICH, Germany and MAHWAH, N.J., Oct. 17, 2005 (PRIMEZONE) -- ADVA Optical Networking today announced the signing of a definitive agreement to acquire all material assets in privately-held Covaro Networks Inc., an Ethernet solutions company based in Richardson, Texas, USA. Covaro is a leading vendor of intelligent Ethernet demarcation products for Ethernet WAN applications that enable service providers to offer intelligent Ethernet services over fiber, copper, SONET/SDH, DS3/DS1 and E3/E1. Covaro will provide a strong complement to the ADVA Fiber Service Platform (FSP), expanding the features and functionalities of ADVA's Ethernet access solution.
Under the terms of the agreement, ADVA will acquire all material Covaro Networks Inc. assets via a combination of shares and cash. A price component of USD 15 million will be paid in 2,024,190 to-be-issued shares of ADVA common stock via a capital increase. Thirty-five percent of these shares will be tradable immediately upon issuance, and the remaining new shares will be subject to various lock-up provisions. A second price component of approximately USD 4 million will be paid in cash. Furthermore, an earn-out of up to USD 5 million may be paid in cash based on achievement of specific sales and gross margin targets in Q4 2005 and FY 2006 for products developed by Covaro. The acquisition is subject to various standard closing conditions and is anticipated to close in January 2006. A majority of Covaro's more than 50 employees will be fully integrated into ADVA's North American organization and their Richardson engineering facilities will become an additional ADVA site.
ADVA expects the acquisition to be operating-income-neutral in 2006. The transaction is expected to dilute earnings per share (EPS) to a limited extent, while EPS accretion is anticipated in 2007 and beyond.
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ADVA AG Optical Networking, Martinsried/Munich and Meiningen, Germany ADVA Optical Networking Inc., Mahwah, New Jersey, USA ADVA Optical Networking Corp., Tokyo, Japan www.advaoptical.com