London - Optical-switch provider Tellium Inc. (Oceanport, N.J.) and access gear maker Zhone Technologies Inc. plan to merge in an all-stock transaction that will leave privately held Zhone (Oakland, Calif.) holding 60 percent of the merged company's equity.
Based on the present number of Tellium's fully converted shares outstanding, Zhone will receive approximately 197 million newly issued shares, options and warrants to purchase shares of Tellium common stock prior to closing the deal. The exact number of Tellium shares will depend on Tellium's fully converted shares outstanding immediately prior to closing. Tellium shareholders will hold the remaining 40 percent of the merged company.
The proposed transaction is expected to close this fall, and is subject to approval by both companies' shareholders and regulatory agencies.
Mory Ejabat, Zhone's current chairman and chief executive officer, will become chairman and chief executive officer of the combined company. He formerly served as chief executive officer of Ascend Communications.
"This merger positions the combined company as a leading provider of access, metro and core optical solutions to the global telecommunications industry," Ejabat said in a prepared statement. "Combining the two businesses enables us to provide a comprehensive solution for local, metro and long-distance service providers as we see their needs converging. The merger will allow the combined company to realize substantial cost savings from reductions of operating expenses."
The combined company will have a customer base that includes some of the world's largest carriers representing more than 250 international carrier customers. The companies said the transaction will bring substantial cost savings by combining operational expenses.
Earlier this year, Tellium said it needed to cut 130 jobs, or 40 percent of its work force, because of the continuing slump in the telecom sector. In June 2002 it eliminated about 200 positions.