Enterasys (NYSE:ETS)
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Company gains financial resources and flexibility to succeed in
industry consolidation
Enterasys Networks, Inc. (NYSE: ETS), the Secure Networks
Company(TM), today announced that it has signed a definitive merger
agreement to be acquired by an investment group led by the private
investment firms The Gores Group, LLC ("Gores") and Tennenbaum Capital
Partners, LLC ("Tennenbaum") for $386 million.
The Board of Directors of Enterasys has approved the transaction
based upon the unanimous recommendation of a Special Committee of
independent directors. Under the terms of the agreement, each
outstanding share of Enterasys common stock will be converted into the
right to receive $13.92 in cash, representing a premium of 32 percent
over the closing price on the New York Stock Exchange on November 11,
2005. The transaction, which is expected to be completed in the first
quarter of fiscal 2006, is subject to approval by Enterasys
shareholders and other customary closing conditions, including
regulatory approvals.
Mark Aslett, president and chief executive officer of Enterasys,
said, "This transaction provides our shareholders with a substantial
premium over the current market and enterprise values of the Company.
The price reflects our success in repositioning Enterasys and
returning it to a solid operational and financial position, as
demonstrated by our strong Q3 results. Looking forward, we believe
operating as a private company with the backing of Gores and
Tennenbaum will enable us to capture market opportunities not
available to Enterasys today. Both investment firms have a long-term
view and established track records of successfully working with
company management to help companies succeed, especially in industries
expected to see significant change.
"We anticipate that this combination will enable Enterasys to
enhance the value it delivers to customers, partners, employees and
other constituencies as we leverage our leadership position in secure
networking," continued Aslett.
"The transaction would not have been possible without the
dedication of all our employees. It builds on their hard work over the
last several years by adding resources and creating a new platform for
Enterasys to actively participate in future networking industry
consolidation. The Company's current senior management team will
continue to lead Enterasys, with corporate headquarters remaining in
Andover, Massachusetts," concluded Aslett.
Alec E. Gores, chairman and founder of Gores, said, "Enterasys has
world-class technology, an impressive customer base, outstanding
employees and a proven management team--which are qualities we look
for in an investment. With the added support, financial resources and
specialized expertise of Gores and Tennenbaum, we believe Enterasys
can create even greater value for enterprise customers through
continued technology leadership and by pursuing growth opportunities
we see in the industry."
Michael E. Tennenbaum, senior managing partner of Tennenbaum,
said, "We are particularly pleased to partner with The Gores Group and
Enterasys in moving Enterasys to a new level of success. This
transaction provides operational support and financial resources that
will enable Enterasys to be a more formidable competitor in the global
market for enterprise networking solutions."
JPMorgan Securities, Inc. served as financial advisor to the
Company and the Special Committee, and Ropes & Gray LLP acted as legal
advisor to the Board of Directors in connection with the transaction.
Conference Call
Enterasys will host a conference call regarding this announcement
today, Monday, November 14, 2005, at 2:00 p.m. EST. A live Webcast of
the call will be accessible from the "Investors" section of the
Enterasys Web site at www.enterasys.com/corporate/ir/. The call will
be available for replay through November 21, 2005. To access the
replay, dial 888-286-8010 and enter pass code 30172787, or visit the
"Investors" section of Enterasys' Web site.
About Enterasys Networks
Enterasys Networks is the Secure Networks Company(TM), providing
enterprise customers with innovative network infrastructure products,
services and solutions that deliver the security, productivity and
adaptability benefits required by Global 2000 organizations. For more
information on Enterasys Secure Networks and the company's products,
including multilayer switches, core routers, WAN routers, wireless
LANs, network management, and intrusion defense systems, visit
www.enterasys.com.
About The Gores Group LLC
Founded in 1987, Gores is a private investment firm focused on the
technology, telecommunications, and business services sectors. The
firm combines the seasoned M&A team of a traditional financial buyer
with the operational expertise and detailed due diligence capabilities
of a strategic buyer. Gores has a long standing record of creating
sustainable value in its portfolio companies by focusing on customers
and employees, supporting management with operational expertise and
providing the capital required for growth. Recent transactions
include, among others, Anker Systems in the United Kingdom, for which
a public offering was recently completed, WireOne, VSPAN, Proxicom,
Global Tel*Link and National Public Markets Company, which was
purchased from AT&T. Headquartered in Los Angeles, California, Gores
maintains offices in Boulder, Colorado; New York; Zurich and London.
For more information, please visit www.gores.com.
About Tennenbaum Capital Partners, LLC
Tennenbaum Capital Partners is a Santa Monica, California-based
private investment firm managing over $3.7 billion in assets through
private funds. The firm's investment strategy is grounded in a
long-term, value approach, and it assists - both financially and
operationally - transitional middle market companies in such
industries as technology, healthcare, energy, aerospace, business
services, retail and general manufacturing. Tennenbaum's core
strengths include in-depth knowledge of equity and debt financing
vehicles in the public and private markets, as well as a thorough
understanding of special situations. For more information, please
visit www.tennenbaumcapital.com
Proxy Information
In connection with Enterasys' solicitation of proxies with respect
to the meeting of shareholders to be called with respect to the
proposed merger, Enterasys will file with the Securities and Exchange
Commission (the "SEC"), and will furnish to its shareholders a proxy
statement. Shareholders are advised to read the proxy statement when
it is finalized and distributed to shareholders because it will
contain important information. Shareholders will be able to obtain,
without charge, a copy of the proxy statement (when available) and
other relevant documents filed with the SEC from the SEC's Web site at
www.sec.gov. Shareholders will also be able to obtain, without charge,
a copy of the proxy statement and other relevant documents (when
available) on the Web at www.enterasys.com, or by directing a request
by mail or telephone to Enterasys Networks, Inc., 50 Minuteman Road,
Andover, MA, 01810, Attention: Investor Relations; Telephone:
978-684-1473.
Enterasys and certain of its directors, executive officers and
other members of management and employees may, under the rules of the
SEC, be deemed to be "participants" in the solicitation of proxies
from Enterasys' shareholders in favor of the proposed merger.
Information regarding the persons who may be considered "participants"
in the solicitation of proxies will be set forth in Enterasys' proxy
statement relating to proposed merger when it is filed with the SEC.
Information regarding certain of these persons and their beneficial
ownership of Enterasys common stock as of August 30, 2005, is also set
forth in the Schedule 14A filed by Enterasys on September 15, 2005,
with the SEC.
This news release contains forward-looking statements regarding
future events, activities and financial performance, such as
management's expectations regarding future revenue and cash flow;
strategic relationships and market opportunities; product development;
and other business strategies and objectives. These statements may be
identified with such words as "we expect," "we believe," "we
anticipate," or similar indications of future expectations. These
statements are neither promises nor guarantees, and actual future
financial performance, events and activities may differ materially.
Readers are cautioned not to place undue reliance on these statements,
which speak only as of the date hereof. We expressly disclaim any
obligation to update such statements publicly to reflect changes in
the expectations, assumptions, events or circumstances on which such
statements may be based or that may affect the likelihood that actual
results will differ materially.
Some risks and uncertainties that may cause actual results to
differ materially from these forward-looking statements include, but
are not limited to: risks associated with the proposed merger;
worldwide and regional economic uncertainty and recent political and
social turmoil may continue to negatively affect our business and
revenue; we have a history of losses in recent years and may not
operate profitably in the future; our quarterly operating results may
fluctuate, which could cause us to fail to meet quarterly operating
targets and result in a decline in our stock price; we earn a
substantial portion of our revenue for each quarter in the last month
of each quarter, which reduces our ability to accurately forecast our
quarterly results and increases the risk that we will be unable to
achieve previously forecasted results; we continue to introduce new
products, and if our customers delay product purchases or choose
alternative solutions, or if sales of new products are not sufficient
to offset declines in sales of older products, our revenue could
decline, we may incur excess and obsolete inventory charges, and our
financial condition could be harmed; we may be unable to upgrade our
indirect distribution channels or otherwise enhance our selling
capabilities, which may hinder our ability to grow our customer base
and increase our revenue; we have experienced significant changes in
senior management and our current management team has been together
for only a limited time, which could limit our ability to achieve our
objectives and effectively operate our business; there is intense
competition in the market for enterprise network equipment, which
could prevent us from increasing our revenue and achieving
profitability; a portion of the enterprises we sell to rely in whole
or in part on public funding and often face significant budgetary
pressure, and if these customers must delay, reduce or forego
purchasing from us, our revenues could be harmed; we depend upon a
limited number of contract manufacturers for substantially all of our
manufacturing requirements, and the loss of any of our primary
contract manufacturers would impair our ability to meet the demands of
our customers; and those additional risks and uncertainties discussed
in our most recent filings with the Securities and Exchange
Commission, including our quarterly report on Form 10-Q for the fiscal
quarter ended October 1, 2005.