Corvis Corp. (Quote) is acquiring undersea optical networking company Dorsal Networks in a $90 million stock deal. The merger agreement calls for Corvis, which makes switches and routing equipment for land-based optical networks, to pay Dorsal with 40 million shares of Corvis based on the Columbia, Md.-based company's Tuesday closing price of $2.26 per share,
The deal excludes the approximate three percent stake in Dorsal that Corvis already owns through a previous agreement. Additionally, all outstanding options and shares of Dorsal held by employees will be exchanged for options and shares in Corvis. The acquisition is expected to close in the second quarter of this year.
The terms of the agreement have been unanimously approved by a special committee of the Board of Directors of both Corvis and Dorsal. Dr. David Huber, chairman and chief executive officer of Corvis, who is also a shareholder and the chairman of the board of Dorsal, did not participate on the committee. Huber has agreed to vote his shares in favor of the proposed transaction.
Dorsal, which is also located in Columbia, builds turnkey undersea optical communications systems for the global telecommunications services industry. The company's next-generation transoceanic and regional undersea network solutions should complement Corvis' terrestrial dense wave-division multiplexing (DWDM) transmission equipment, optical switching products and its unrepeatered festoon systems.
Industry market research and consulting firm RHK, the market for undersea transport equipment is expected to be $6 billion this year.
"Through this acquisition, Corvis will bring compelling solutions to a market that is looking for alternatives," said Dr. Terry Unter, Corvis chief operating officer. "We will deliver optical backbone solutions that maximize network efficiencies regardless of where continents and oceans begin and end."
According to Corvis officials, Dorsal complements Corvis' value proposition by offering next-generation network solutions that "fundamentally change the economics of deploying undersea bandwidth." Dorsal's solutions significantly increase system capacity, deliver the industry's lowest cost-per-bit and require only a fraction of the footprint currently required by competitive offerings.
"Dorsal is well positioned, among a small number of competitors, to take advantage of new undersea network opportunities," said Jim Bannantine, Dorsal president and chief executive officer. "By combining with Corvis, with its proven track record of delivering large scale backbone networks, we will have the critical customer support and manufacturing resources to address this large market opportunity."
Unter added, "Dorsal's management team brings extensive experience in this market. Their proven track record in designing and deploying global undersea networks will allow us to integrate our businesses and capture market share rapidly."
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