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Filed by Adaptive Broadband Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Adaptive Broadband Corporation
Commission File No. 0-07428
November 13, 2000
The following information contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties which could cause actual
results to differ materially from those projected, anticipated or implied.These
statements are often indentified by words such as "expect", "anticipated" and
"intend." The forward-looking statements address the following subjects, among
others: expected date of closing the merger, future financial and operating
results, and timing and benefits of the merger. Statements regarding the
expected date of completion of the transaction are subject to the risk that the
closing conditions will not be satisfied, including the risk that regulatory
approvals will not be obtained or that the stockholders of Western Multiplex or
Adaptive Broadband will not approve the merger and that the merger will not be
consummated.
Statements regarding the expected benefits of the transaction and the company's
expected revenues and EBITA margins are subject to the following risks: that
expected synergies will not be achieved; that that businesses will not be
integrated successfully; that merger costs will be greater than expected; the
inability to identify, develop and achieve success for new products, services
and technologies; increased competition and its effect on the company's pricing
and need for marketing; disruption from the merger making it more difficult to
maintain relationships with customers, employees or suppliers; the inability to
establish or renew relationships with advertising, marketing, technology, and
product or component providers or suppliers; and to the general risks associated
with the companies' businesses.
Careful consideration also should be given to cautionary statements made in
Western Multiplex's reports filed with the Securities and Exchange Commission,
especially the section entitled "Risk Factors" in Western Multiplex's Form S-1
filed on July 20, 2000 and in Adaptive Broadband's reports filed with the
Securities and Exchange Commission, especially the section entitled "Risk
Factors" in Adaptive Broadband's Annual Report on Form 10-K for the year ended
June 30, 2000.
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THE FOLLOWING ARE QUESTIONS AND ANSWERS REGARDING THE MERGER
DISSEMINATED BY WESTERN MULTIPLEX CORPORATION AND ADAPTIVE
BROADBAND CORPORATION ON NOVEMBER 13, 2000
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Q&A
Confidential & Proprietary
This FAQ sheet is designed to help you understand the announcement of the
merger.
The following information contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties, which could cause actual
results to differ materially from those projected, anticipated or implied. The
forward-looking statements address the following subjects, among others:
expected date of closing the merger, future financial and operating results, and
timing and benefits of the merger. The following factors, among others, could
cause actual results to differ materially from those described in the
forward-looking statements: the risk that the Western Multiplex and Adaptive
Broadband businesses will not be integrated successfully; costs related to the
proposed merger; failure of the Western Multiplex or Adaptive Broadband
stockholders to approve the proposed merger; disruption from the merger making
it more difficult to maintain relationships with customers, employees or
suppliers; inability to further identify, develop and achieve success for new
products, services and technologies; increased competition and its effects on
pricing, third-party competition and revenues; and an inability to establish and
maintain relationships with advertising, marketing, technology, and product or
component providers or suppliers.
Careful consideration also should be given to cautionary statements made in
Western Multiplex's reports filed with the Securities and Exchange Commission,
especially the section entitled "Risk Factors" in Western Multiplex's Form S-1
filed on July 20, 2000, and in Adaptive Broadband's report filed with the
Securities and Exchange Commission, especially the section entitled "Risk
Factors" in Adaptive Broadband's Annual Report on Form 10-K for the year ended
June 30, 2000.
THE ANNOUNCEMENT
What are you announcing today?
That Western Multiplex and Adaptive Broadband have signed a definitive merger
agreement pursuant to which Adaptive Broadband will merge with a subsidiary of
Western Multiplex. The combined company, we believe, will be positioned to
become one of the broadest-based broadband wireless infrastructure company in
the world.
What is the rationale for merging with Adaptive Broadband?
Combining Adaptive Broadband, a leader in point-to-multipoint last mile access,
with Western Multiplex, a leader in point-to-point access for wireless access
backhaul, enterprise networks and fiber extension, creates an organization with
the engineering,
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technological, sales and marketing scale to truly offer integrated world class
products to these large and growing markets.
From Western Multiplex's point of view, Adaptive Broadband represents a major
step in executing our vision to consolidate network functionality at the ISP and
telco. To do that we needed to offer a point-to-multipoint product line for last
mile access. While we are pleased with the prospects of our Ubiquity
point-to-multipoint product line, Adaptive Broadband provides this immediately
and also provides a strong complimentary market position. Together we will be
able to offer our customers complete solutions from the edge of the internet
cloud to the side of an end-user's home or office in a much more timely and cost
effective manner than Western Multiplex could on our own.
Why does Adaptive Broadband want to merge?
When we began discussions with Adaptive Broadband, it was clear we had similar
philosophies and visions regarding product functionality, integration, and the
evolution of our industry. Both companies also have tremendous expertise in the
license-free bands of the spectrum. Adaptive Broadband was evaluating
alternatives and investing valuable R & D resources to expand into the
point-to-point market and they knew Western Multiplex would be able to provide
the necessary tools and expertise to accomplish their goal. In addition the
technology developed in our Ubiquity product line will enhance Adaptive
Broadband's AB-Access platform.
What is the significance of this merger?
This merger is the first step toward the consolidation of the wireless
infrastructure industry, which has been both fragmented and niche oriented. The
combined company will have world class products and will have a leadership
position in three of the four wireless market segments--last mile access, campus
and enterprise connectivity, and mobile wireless backhaul.
Are there any synergies?
We believe the combination will allow both companies to accelerate product
introductions. Specifically, we will be able to redeploy some of the engineers
currently working on Ubiquity to our OC3/OC12 development. Other Ubiquity
engineers will be able to help Adaptive Broadband bring out its low cost
residential product sooner. In addition we will be able to get the Wireless
Access Concentrator (WAC) with integrated backhaul and last mile access out
earlier than we would be able without a combination.
On the sales side, we expect to realize revenue enhancements by selling Adaptive
Broadband's products though our reseller channel increasing their sales in the
campus and enterprise market segment. We also will be able to sell the new
Adaptive Broadband 3.5Ghz products into our international markets.
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Does Adaptive Broadband have any proprietary technology?
Adaptive Broadband has 25 patents that are either applied for, pending or in
process and Western Multiplex has 12, which adds up to one of the broadest
technology portfolios in the industry.
THE DEAL
Describe the terms of the deal.
Subject to shareholder approval and other conditions, Adaptive Broadband
shareholders will receive a fixed exchange ratio of 1.345 Western Multiplex
shares for each Adaptive Broadband share held. Based on this exchange ratio,
Adaptive Broadband shareholders will own approximately 48% of the combined
company and Western Multiplex shareholders will own approximately 52%.
The transaction will be accounted for as a purchase and will be tax-free to
Adaptive Broadband U.S. shareholders.
When will the deal close?
We expect the transaction to close in the first quarter of 2001.
How did the parties arrive at the exchange ratio? Is it fair?
The parties negotiated the exchange ratio based on a number of factors. The
Board of Directors of Adaptive Broadband and the Board of Directors of Western
Multiplex each unanimously approved the terms and believe that the exchange
ratio is fair to their shareholders from a financial point of view.
Are there any planned write-offs as a result of this transaction?
Although we have not made any decisions regarding write-offs at the time of
announcement, we expect to take write-offs that would be customary in
transactions of this type.
What effect (on the overall cost of the transaction) would a change in Western
Multiplex's share price have on the deal?
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None. The share exchange ratio is fixed and there is no collar. However, we
negotiated mutual "walk-away" protections in the definitive agreement that allow
the parties to terminate the merger under limited circumstances in the event
that market conditions at the time of the closing have caused Western Multiplex
stock to decline significantly in price. The details of these provisions are
contained in the merger agreement, which will be filed with the SEC and
available for review online shortly.
Who were the advisors on the deal?
Credit Suisse First Boston and Ripplewood Holdings LLC advised Western Multiplex
and Dain Raucher Wessels advised Adaptive Broadband. Simpson Thacher & Bartlett
are the lawyers for Western Multiplex, and Cooley Godward LLP are the lawyers
for Adaptive.
Ripplewood is still a major shareholder in Western Multiplex. Do they support
the deal?
We believe that Ripplewood was instrumental in making this deal happen. WMC
Holding LLC, a majority shareholder of Western Multiplex controlled by
Ripplewood Holdings LLC and its affiliates, has agreed to vote its shares in
favor of the merger.
How did this merger come about? Who approached whom?
Western Multiplex approached Adaptive Broadband. After analysis of our
alternatives in the point to multipoint space, we felt Adaptive Broadband had
the most complimentary product line and technology and a strong market position.
As a result, we were keen to bring them into our organization. At the same time,
Adaptive Broadband recognized the opportunity and shared our consolidation
philosophy. After analysis of their alternatives on the point-to-point space,
they came to the conclusion that a merger with Western Multiplex would create a
very powerful team, well positioned for future growth.
Were you competing with other bidders?
No, Adaptive Broadband was not actively pursuing a merger or sale of the
company, and each company viewed this as a strategic opportunity. The primary
motivation was based on rapid growth, better returns for shareholders, better
products for customers, and better opportunities for employees.
Were you considering any other companies to buy?
We continually seek ways to grow our business both organically as well as
through acquisitions. We are continually evaluating acquisition alternatives. As
we have stated, we believe there are benefits to the consolidation of our
industry, which is highly fragmented with many small niche players. Combining
with Adaptive Broadband
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provides a strong platform to continue our growth. However, we do not comment on
rumors or speculate on hypothetical transactions.
Are any companies pursuing Western Multiplex?
We are not aware of any companies pursuing Western Multiplex. We are not for
sale, and we believe we have great opportunities to consolidate the broadband
wireless space and grow our business.
Do you plan to issue more shares in a secondary offering?
We don't comment on the company's future financing plans.
What's your cash position right now? Do you have enough to fuel R&D and future
growth?
As you know, Western Multiplex has been profitable for many years. Last quarter
Western Multiplex generated EBITA of $5.5 million. Before merger related
expenses, the combined company will have approximately $150 million in cash and
we believe this will be enough cash to fund current and future operations for
the foreseeable future.
FUTURE FINANCIAL PERFORMANCE
Are you providing any financial guidance for the combined company's performance
next year?
Yes, we are targeting slightly better than $300 million in consolidated revenue
in 2001, with the expectation that Adaptive Broadband will have a minimal effect
on the Q1 2001 financial performance of Western Multiplex. In the first full
quarter of combined operations, which is Q2, we anticipate generating
approximately $70 to $75 million of revenue. We also plan to enter 2002 with a
65% year-to-year revenue growth rate. Clearly the first quarter we close, due to
write-offs, we will be showing substantially less profit, but we expect this
transaction to be accretive to cash EPS by the 4th quarter of 2001 and
continually thereafter.
How will this affect margins?
The model for Western Multiplex has been a 50% gross margin and 17% EBITA
margins. In the quarters immediately following completion of the deal, we are
forecasting
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the model will shift slightly to a 45% gross margin and 10% EBITA margin, since
Adaptive Broadband is in an earlier stage of achieving its business model.
Entering 2002 we are forecasting that the consolidated EBITA margin will return
to the 17% level and consolidated gross margins will improve to 47%.
The shift to slightly lower gross margins is due to the nature of
point-to-multipoint equipment where the hub unit has substantially higher
margins than the subscriber unit. As the AB Access platform gets more widely
deployed, we expect to see mix related issues. Adaptive Broadband has cost
reduction programs in place including using additional ASICs which will be
accelerated because of the acquisition.
ORGANIZATION AND PEOPLE
Who will run the new organization and what other significant executive changes
are taking place?
The management team is a combination of top talent from both organizations.
Jonathan Zakin, Chairman and CEO of Western Multiplex remains Chairman and CEO.
Fred Lawrence, Chairman and CEO of Adaptive Broadband will become a board member
and advisor, focused specifically on business opportunities in Europe. Dan
Scharre, Adaptive Broadband's President and COO will become President and COO.
Donna Birks, Adaptive Broadband's CFO and EVP of Finance becomes CFO and EVP of
Finance. Amir Zoufonoun Western Multiplex's President and COO becomes EVP of
Marketing, Research and Development. Fred Corsentino, Western Multiplex's EVP of
Worldwide Sales becomes the EVP of Worldwide Sales. Nancy Huber, Western
Multiplex's VP of Finance and CFO will lead the transition and integration
teams.
Will anyone lose his or her job?
This story is all about growth. Our goal is to expand our business and growth
provides more opportunities for employees from both companies. Our key asset is
our people and they will be critical to running our business and continuing to
meet our growth and profitability goals. In areas where there is overlap, we
would hope to redeploy our employees to other areas if they like. There is ample
opportunity for everyone in the company to add value and make an impact.
Will Adaptive Broadband remain in Sunnyvale?
One of the unique coincidences of this transaction is that the companies are
headquartered literally across the street from each other. This reduces
transition risks that can plague companies because of geographic challenges. We
envision that the combined companies will continue to be headquartered in
Sunnyvale and that we will expand existing facilities.
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Will the corporate cultures blend together smoothly?
Based upon our extensive mutual due diligence, we found great cultural
similarities between the organization as well as a common vision and belief in
the strategic rationale of the combination. We have almost no redundancy in
technology, products and market focus, and a management team that is experienced
managing business combinations. We feel highly confident that our management
teams will be able to insure a smooth transition and integration of the two
organizations.
What is the Adaptive Broadband and Western Multiplex headcount?
Adaptive Broadband has 217 people. Western Multiplex has 214 people.
OPERATIONS
How does this acquisition affect your manufacturing operations?
There are currently no plans to consolidate manufacturing operations in the near
term. Adaptive Broadband outsources its manufacturing to Solectron, and Western
Multiplex uses Pemstar and ISIS.
What does this acquisition do for you internationally?
Historically, Western Multiplex has been strong in Asia and Latin America, and
has been weak in Europe because we have not had products in the frequencies
Europe requires. With this merger we can immediately offer products in the 3.5
GHz band. We also acquire a major R&D facility in Cambridge that we plan to
expand and support. We feel we can sell the 3.5 GHz AB-Access product in Europe
and through our international partners in Taiwan, China, Malaysia, Mexico and
other markets. In addition Adaptive Broadband brings significant strategic
relationships with Hitachi in Japan and Casil Telecom in China.
In this business, is bigger better? And if so, how big do you need to be to win?
The market is rapidly growing, and we believe customers are demanding
broader-based solutions and higher levels of integration. Companies need a
certain level of scale in order to compete successfully, and to provide all of
the stability, services and support these global markets demand.
PRODUCTS
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What will the branding be? Does the Adaptive Broadband name disappear?
The company will be called Western Multiplex. Western Multiplex's Ubiquity
product will be incorporated into the AB-Access product line, which will be our
point to multipoint brand. The transaction will not affect our LYNX telco
interface point-to-point or our Tsunami IP point to point brands.
Can you talk more about the product offerings of each company?
Adaptive Broadband has point-to-multipoint products with both ATM and IP
interfaces based on TDD RF architecture. They provide products currently in the
UNII 5.x band for domestic applications, the 3.5 GHz band for international
applications and the MMDS 2.5 GHz band for both domestic and international
applications. Next year we plan to offer LMDS products in the 28 GHz band.
Western Multiplex has point-to-point products in various licensed and unlicensed
bands with both telco and IP interfaces. There is virtually no overlap between
the two companies product lines.
Please refer to the road show presentation and our individual web sites for
more details.
Furthermore, this combination will speed the time to market of Western
Multiplex's wireless access concentrator - an integrated product that provides
both a point-to-point and point-to-multipoint solution and OC-3/12 fiber
extension products.
Who are some of the major customers of each company?
Again, more detailed information is provided in the road show. In general,
Adaptive Broadband is strong in the ISP market while Western Multiplex is strong
with wireless operators, ISPs and telcos. There is very little overlap between
the two companies customer base and there is great opportunity to sell each
others products.
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ADDITIONAL INFORMATION AND WHERE TO FIND IT
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE MERGER WHEN IT BECOMES AVAILABLE BECAUSE IT
WILL CONTAIN IMPORTANT INFORMATION. The joint proxy statement/prospectus will be
filed with the Securities and Exchange Commission by Western Multiplex and
Adaptive Broadband. Investors and security holders may obtain a free copy of the
joint proxy statement/prospectus (when it is available) and other documents
filed by Western Multiplex and Adaptive Broadband at the Commission's web site
at www.sec.gov. The joint proxy statement/prospectus and these other documents
may also be obtained for free from the parties.
In addition to the joint proxy statement/prospectus, Western Multiplex and
Adaptive Broadband file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information filed by Western Multiplex
and Adaptive Broadband at the Securities and Exchange public reference rooms at
450 Fifth Street, N.W., Washington, D.C. 20549 or at any of the Commission's
other public reference rooms in New York, New York and Chicago, Illinois.
Western Multiplex's and Adaptive Broadband's filings with the Commission are
also available to the public from commercial document-retrieval services and at
the website maintained by the Commission at http://www.sec.gov.
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Western Multiplex, Adaptive Broadband and their respective directors and
executive officers may be deemed to be participants in the solicitation of
proxies from the security holders of Western Multiplex and Adaptive Broadband in
favor of the merger. The directors and executive officers of Western Multiplex
and their beneficial ownership of Western Multiplex common stock are set forth
in the registration statement filed by Western Multiplex on Form S-1 on July 20,
2000. The directors and executive officers of Adaptive Broadband and their
beneficial ownership of Adaptive Broadband common stock are set forth in the
proxy statement for the 2000 annual meeting of Adaptive Broadband. In addition,
in connection with signing the merger agreement, certain executive officers of
Adaptive Broadband have entered into employment agreements with Western
Multiplex, upon completion of the merger, certain directors of Adaptive
Broadband will become directors of Western Multiplex, the executive officers of
Adaptive Broadband own options to purchase shares of Adaptive Broadband common
stock which will become vested and exercisable in connection with the merger and
Western Multiplex has agreed to provide indemnification and director and officer
liability insurance coverage to the directors and executive officers of Adaptive
Broadband following the merger. Security holders of Western Multiplex and
Adaptive Broadband may obtain additional information regarding the interests of
the foregoing people by reading the joint proxy statement / prospectus when it
becomes available.
CONTACT:
Nancy Huber
Western Multiplex Corporation
(408) 542-5225
[email protected]
Stephanie Day
Adaptive Broadband Corporation
Investor Information Line
(Toll-free 1-888-225-6789)
www.adaptivebraodband.com
