Backhaul provider DragonWave announced that it will acquire Nokia Siemens Networks' microwave transport business, including its associated operating support systems (OSS) and related support functions. The move should help diversify DragonWave's business prospects as it continues to suffer from Clearwire's slowdown in capital spending.
According to the terms of the deal, DragonWave will pay about $13.7 million (10 million euros) in cash and $6.9 million wroth of DragonWave common shares that will be subject to a lock-up agreement restricting sale or disposition of the shares for two years. DragonWave will assume employee liabilities of $13.7 million and will enter into a capital asset lease arrangement for approximately $7 million.
DragonWave will also become the preferred strategic supplier to NSN of packet microwave and related products. The companies aim to complete the planned acquisition and supply agreements in the first quarter of 2012.
Following the acquisition, NSN will retain responsibility for its existing solution sales and associated services for microwave transport, while DragonWave would be responsible for the product line, including R&D, product management and operations functions.
The terms of the agreement also provides for sales performance based earn-out payments to be made after the deal closes. The hardware and basic software earn-out period runs for 18 months following closing and the earn-out period on application software upgrades runs for four years following closing. The earn-out payments could raise the value of the transaction by approximately $110 million.
DragonWave said it expects to finance the transaction through a combination of cash on its balance sheet and increased debt facilities provided by Comerica Bank and Export Development Canada.
DragonWave said the deal should substantially broaden its product presence in major mobile operators throughout the world.
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