SR Telecom Inc. (T.SRX) signed a definitive agreement to acquire Netro Corp. (NasdaqNM: NTRO), which develops fixed broadband wireless network systems, for $3.11 a share, or about $121 million, in cash and stock, representing a premium of 28% to Netro's Wednesday closing stock price of $2.43.
SR Telecom expects the acquisition to add to cash flow for its fiscal 2004, with minimal impact on earnings per share in 2004, then adding to earnings per share in 2005.
Netro will pay a dividend of $100 million immediately prior to close, while SR Telecom will issue American Depository Receipts representing up to 41.5 million of its common shares, exchangeable by Netro shareholders into SR Telecom common stock.
Upon close, which the companies expect early in the third quarter, Netro shareholders will own about 43% of SR Telecom.
In a press release Thursday, SR Telecom said the acquisition adds the next- generation 3.5 GHz Angel to its product portfolio.
The wireless-access services provider, which has about 54.7 million shares outstanding, plans to file a registration statement with the Securities and Exchange Commission to sell the ADRs in the U.S. and will seek to quote the ADRs on Nasdaq. Shares of SR Telecom closed Wednesday at C$0.75 cents on the Toronto Stock Exchange.
Nasdaq trading in shares of Netro closed Wednesday down 6 cents, or 2.4%, at $ 2.43. The stock traded at a 52-week low of $1.56 Nov. 1 and a 52-week high of $ 3.70 on Aug. 2.
Netro was founded at the end of 1994 as an Israeli company. It later became a US company, in order to make it easier to raise capital. Netro raised some $500 million on Nasdaq in the period 1999-2000. Its two founders were Gideon Ben-Efraim, CEO, and Eli Pasternak, who left the company. Among investors in Netro were Merrill Lynch, Cisco, US Ventures, AT&T Ventures, Brentwood Venture Capital, and Siemens.
Analyst Ehud Eisenstein of Oscar Gruss says that Netro traditionally dealt in LMDS with a product called Air Star. "Netro depended on a contract with Lucent, and on the basis of this great promise, it raised $500 million," says Eisenstein. "In the end, Netro arrived at a situation in which LMDS made almost no sales. To improve the situation, the company turned to low frequencies, called sub-11, to which end it bought Project Angel from AT&T Wireless, but this didn't take off either."
Globes: How will the acquisition help Netro?
"Netro has never managed to sell its products commercially, even though, on paper, they were good products. It may be that the new owners will be able to be more aggressive in the market for Netro's products, and if they behave differently, they may be able to push them. SR Telecom specializes in older generation products, that provide long-distance narrowband communications, and the acquisition opens up new areas for them."
Published by Globes [online] - www.globes.co.il - on March 27, 2003