Tekelec and GENBAND sign agreement for sale of Tekelec's Switching Solutions Group
Tekelec and GENBAND have announced that they have entered into a definitive agreement for the purchase by GENBAND of Tekelec's Switching Solutions Group. The transaction is expected to close during April 2007, and is subject to customary approvals and closing conditions.
The transaction is structured as a sale of Tekelec’s equity interests in Santera Systems LLC and Taqua, Inc. and the SSG business assets held by Tekelec in exchange for a 19.9% common equity interest in GENBAND, $1.0 million in cash and GENBAND’s assumption of certain SSG liabilities. Twenty-five percent of the equity issuable at closing will be held in escrow for one year pending the expiration of the indemnity period. Tekelec will have no operational role in GENBAND and will account for its investment under the cost method of accounting.
In connection with the disposition, Tekelec expects to record a net loss after tax on a GAAP basis of approximately $55 million to $70 million. The estimated cash impact on Tekelec after tax benefits is not expected to be significant. This preliminary estimate is subject to further adjustment based on a number of factors, including the actual net assets on the closing date, the completion of the final valuation of the GENBAND common stock received, the purchase price allocation and certain other costs and obligations retained by Tekelec as part of the transaction. As a result of the disposition, Tekelec will report the results of operations and the loss on the sale of the SSG business as a discontinued operation beginning in the first quarter of 2007.
Tekelec has approximately 465 employees directly and indirectly associated with SSG. The majority of these employees will transfer to GENBAND, and the remainder will be terminated in a restructuring at the time of closing. The loss on this disposition includes estimated pre-tax restructuring charges of approximately $18 million to $20 million for personnel and facility consolidation costs related to sale of the SSG business.
GENBAND has extensive experience in next generation switching platforms and applications and a strong existing customer base. The company is backed by leading technology venture capital firms, including Sevin Rosen Funds, Venrock Associates and Oak Investment Partners, in addition to investments from strategic partners, including Alcatel-Lucent, Siemens and Texas Instruments. GENBAND says it has the experience to support Tekelec’s more than 350 SSG customers which will be transferred as part of the sale.
Commenting on the sale, Frank Plastina, President and CEO of Tekelec said, “We are satisfied with this transaction and our opportunity to become a shareholder in GENBAND. Our SSG customers will benefit from working with GENBAND given its experience in the VoIP marketplace and its capabilities in supporting Tier 1 service providers. Our shareholders will benefit from Tekelec’s increased investment focus on signaling and session control opportunities.”
Charles D. Vogt, President and CEO of GENBAND said “The combination of the two companies creates an enviable gateway and applications product portfolio and enables GENBAND to strengthen our relationship with our existing customers and business partners.”
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