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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 7, 2000
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VISUAL NETWORKS, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 000-23699 52-1837515
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<S> <C> <C>
(State of incorporation) (Commission file number) (IRS Employer Identification No.)
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2092 Gaither Road
Rockville, Maryland 20850
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(Address of principal executive offices) (Zip code)
(301) 296-2300
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(Registrant's telephone number)
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ITEM 5. OTHER EVENTS.
On February 7, 2000, Visual Networks, Inc. ("Visual"), Avesta Technologies,
Inc. ("Avesta") and Visual Acquisitions Three, Inc. ("Merger Sub") entered into
an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
Merger Sub will merge with and into Avesta (the "Merger").
Under the terms of the Merger Agreement, all outstanding shares of Avesta
capital stock and all shares of Avesta common stock reserved for issuance upon
the exercise of all outstanding Avesta stock options and warrants will be
exchanged for 6,532,554 shares of Visual common stock and up to 2,000,000 shares
of Visual common stock that may be issued upon the attainment by Avesta of the
following revenue milestones (the "Earnout Shares"). For every $1.00 of gross
revenue recorded by Avesta for the period commencing April 1, 2000 through
December 31, 2000 (the "Earnout Period"), in excess of $25,000,000 and up to and
including $33,450,000, the number of Earnout Shares earned shall be increased by
0.1910 share. For every $1.00 of gross revenue recorded by Avesta during the
Earnout Period in excess of $33,450,000 and up to and including $42,067,000, the
number of Earnout Shares earned shall be increased by 0.0448 share. If the gross
revenue recorded by Avesta for the period January 1, 2000 through March 31,
2000, is less than $5,000,000, for every $1.00 shortfall below $5,000,000, the
number of Earnout Shares earned shall be decreased by 0.1183 share.
Upon the consummation of the Merger, Avesta will become a wholly-owned
subsidiary of Visual. The transaction will be accounted for utilizing the
purchase method. The Merger is intended to qualify, for federal income tax
purposes, as a tax-free reorganization. The Merger is subject to customary
closing conditions and the approval of the stockholders of Visual.
Visual issued a press release announcing the Merger on February 7, 2000,
which is filed herewith as Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 Press release of Visual Networks, Inc., dated February 7,
2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 18, 2000 Visual Networks, Inc.
/s/ Peter J. Minihane
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By: Peter J. Minihane
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
99.1 Press release of Visual Networks, Inc., dated February 7, 2000.
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EXHIBIT 99.1 PRESS RELEASE
FOR IMMEDIATE RELEASE
PRESS CONTACTS:
Debra Eisenberg Susana Thompson
Visual Networks The Harbor Group
301-296-2295 978-526-1601
[email protected] [email protected]
INVESTOR CONTACT:
Angela Tandy
Visual Networks
301-296-2394
[email protected]
VISUAL NETWORKS ACQUIRES AVESTA TECHNOLOGIES TO
CREATE LEADING FORCE IN SERVICE MANAGEMENT MARKET
-- Combined product portfolio gives service providers and
enterprises the systems they need to deploy e-commerce
solutions quickly and confidently --
ROCKVILLE, MD -- FEBRUARY 7, 2000 -- Visual Networks, Inc. (NASDAQ: VNWK) -- the
leading provider of service management solutions for the Internet -- today
announced that it has signed a definitive agreement to acquire Avesta
Technologies, Inc., a privately held provider of next-generation
event-management solutions, in an all-stock transaction valued at approximately
$415 million.
By combining Avesta Technologies' next-generation event management and
applications monitoring capability into its product portfolio, Visual Networks
is responding to the growing trend among enterprises to outsource their networks
and applications to service providers. This rapid shift in market dynamics has
created a need for end-to-end service management that
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integrates networks, systems, and applications into a unified service view for
service providers and their enterprise customers. The companies' combined
product set answers this need by giving customers the systems required to deploy
e-commerce solutions quickly and confidently.
With the acquisition of Avesta Technologies, Visual Networks will be able
to provide its traditional carrier and ISP customer base with unparalleled fault
and event management and application monitoring solutions. Visual Networks'
expanded product portfolio gives customers the ability to manage real-time and
historical availability and performance on an end-to-end basis across all
service definitions -- from base transport services through and including hosted
applications services. Additionally, this acquisition expands Visual Networks'
market opportunity to include large enterprise IT organizations as well as the
rapidly emerging applications service provider (ASP) market.
"Visual Networks is changing the playing field for service management,"
said Scott Stouffer, president and CEO, Visual Networks. "Instead of having to
integrate products from many small vendors, our ISP, ASP, enterprise, and
traditional service provider customers will now have a unified strategic
partner."
"This combination represents a critical piece of our articulated strategy
to become the largest service management vendor with the industry's broadest
portfolio of products and functionality," added Stouffer. "As a combined entity,
we can offer a broad solution set for managing the Internet infrastructure
end-to-end -- from client to servers to host computers -- as well as the
underlying transport infrastructure."
Visual Networks is projecting the new organization's top-line revenue will
grow by 50 percent in 2000 and 2001.
Avesta Technologies President and CEO Kam Saifi said, "The market is ready
for a comprehensive service management solution, and this union of our two
companies will bring us, our customers and the rapidly growing market that much
closer to a single-vendor solution."
Once the transaction is closed, Saifi will join the Visual Networks' Board
of Directors and assume his new role as executive vice president.
The two companies are expected to operate on an integrated basis with the
integration expected to be completed within three to four months of the close of
the acquisition.
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Avesta Technologies employs approximately 165 people in four domestic and
three international offices. Employees of Avesta Technologies will become
employees of Visual Networks. No layoffs are expected.
FINANCIAL CHARACTERISTICS
Under the terms of the agreement, Visual Networks will purchase all
outstanding shares of Avesta Technologies' capital stock for approximately 6.5
million shares of Visual Networks' common stock. The agreement contains
additional earn-out provisions for Avesta Technologies, contingent on future
milestones, which will be paid in additional Visual Networks shares. The
transaction has been approved by both companies' Board of Directors and is
expected to close early in the second calendar quarter subject to approval of
Visual Networks' stockholders, and other customary closing conditions. The
transaction is to be accounted for by the purchase method and is to be treated
as a tax-free reorganization for federal income tax purposes.
Visual Networks expects to invest heavily in R&D and sales and marketing
for Avesta Technologies' products causing operating losses for those products
through the end of 2001. As a result, this acquisition is expected to be
significantly dilutive through 2001 and accretive thereafter.
AVESTA TECHNOLOGIES, INC.
Founded in 1996 by former senior information technology executives from the
financial services industry, Avesta Technologies is a leading provider of
software solutions that manage the infrastructure of e-business. It provides
software for service providers, Internet companies, other corporations and
government agencies. Avesta's software provides a simple and rapid way for
organizations to detect service disruptions, isolate their root causes and
identify their business impact. Headquartered in New York City and privately
held, the company currently employs approximately 165 people. Avesta's extensive
client base includes global financial institutions, telecommunications and
service providers, and dot-com industry leaders. The company operates in six
locations, including offices in San Jose, CA; Silver Spring, MD; Plano, TX;
Ottawa, ON; Singapore; and London, UK.
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ABOUT VISUAL NETWORKS
Visual Networks, Inc. is the market leader in providing service
management solutions for New World networks. The company provides reliable
network infrastructure for the Internet and IP corporate networks whether they
are running on frame relay, ATM, IP VPN, or any other transport technologies.
Utilizing Visual Networks systems such as Visual UpTime(R) and Visual IP
InSight(TM), service providers and their subscribers can increase network
reliability, dramatically reduce operational expenses, and lower their
customers' total cost of ownership. Visual Networks' headquarters are located in
Rockville, Maryland, with sales offices nationwide. For sales information call
1.800.240.4010 or visit www.visualnetworks.com.
This press release may contain forward-looking information within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and is subject to the safe harbor created by those
sections.
Visual Networks assumes no obligation to update the information contained in
this press release. Visual Networks' future results may be impacted by its
ability to continue to implement its provider deployment model, its lengthy
sales cycle, dependence upon its major customers, risks associated with the
integration of acquisitions, risks associated with rapid technological change
and the emerging services market, potential fluctuations in its quarterly
operating results, its dependence on sole and limited source suppliers and
fluctuations in component pricing and its dependence upon key employees. Visual
Networks' future results may be impacted by other risk factors listed from time
to time in its SEC reports, including, but not limited to, the Company's
Registration Statement on Form S-3 dated November 1, 1999, its Form 10-Qs and
its Annual Report on Form 10-K.
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EDITORS NOTE:
Members of the working media and analyst community are invited to participate in
a conference call with Scott Stouffer and Kam Saifi regarding Visual Networks'
acquisition of Avesta Technologies.
To participate, please dial 800-547-5077 (USA) or 320-269-7956 (International)
beginning at 10:35 A.M.
If you are unable to participate in the conference call, a replay will be
available from 3:30 P.M. EDT on February 7 through 11:45 P.M. EDT on February 8.
To access the replay, please dial 800-475-6701 (USA) or 320-365-3844
(International) and enter access code 501663.
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