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Filed by PairGain Technologies, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933, as amended
Subject Company: PairGain Technologies, Inc.
Commission File No.: 0-22202
[PAIRGAIN LOGO]
N E W S R E L E A S E
We urge investors and security holders to read ADC's Registration Statement on
Form S-4 and the Prospectus/Proxy Statement of ADC and PairGain relating to the
merger transaction described below, when they become available, because they
will contain important information. When these and other documents relating to
the transaction are filed with the U.S. Securities and Exchange Commission, they
may be obtained free at the SEC's web site at http://www.sec.gov. You may also
obtain each of these documents (when they become available) for free from ADC or
from PairGain by directing your request to the investor relations contact
persons identified below.
FOR IMMEDIATE RELEASE
CONTACTS:
Mark Borman - Investor Relations Kim Gower or Robert Price
ADC PairGain Technologies
612-946-3338 714-832-9922
Rob Clark - Public Relations
ADC
612-914-6355
ADC BECOMES LEADING SUPPLIER OF DSL BROADBAND ACCESS SYSTEMS
WITH ACQUISITION OF PAIRGAIN TECHNOLOGIES
Proposed $1.6 Billion Acquisition Strengthens ADC's Position As
A Leading Global Supplier of Broadband, Multiservice Systems
Connecting Residences and Businesses
MINNEAPOLIS / TUSTIN, CALIF. - FEBRUARY 23, 2000 - ADC (Nasdaq: ADCT,
www.adc.com), a leading global supplier of network equipment, software and
integration services for broadband, multiservice networks, and PairGain
Technologies, Inc. (Nasdaq: PAIR, www.pairgain.com), a leader in the design,
manufacture, marketing and sale of digital subscriber line (DSL) networking
systems, have reached an agreement for the acquisition of PairGain by ADC.
Under the terms of the agreement, each share of PairGain's common stock will be
converted into 0.43 share of ADC common stock with a fixed exchange ratio. Based
on the closing share price of $46.81 for ADC's stock on February 22, 2000, the
transaction is valued at approximately $1.6 billion. The proposed transaction is
expected to be completed during ADC's third fiscal quarter, which ends July 31,
2000, and is intended to be accounted for as
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ADC ACQUIRES PAIRGAIN TECHNOLOGIES, INC./2
a pooling of interests and to be treated as a tax-free reorganization for U.S.
federal income tax purposes. ADC expects the acquisition to be nondilutive to
its earnings per share for the balance of fiscal year 2000 and $0.05 accretive
in fiscal year 2001. Closing of the proposed transaction is subject to the
approval of PairGain's stockholders, receipt of required regulatory approvals
and other customary conditions. After closing the transaction, ADC expects to
take a one-time charge for various acquisition-related expenses the amount of
which has not yet been determined.
ADC STRENGTHENS DSL MARKET POSITION AND EXPANDS BROADBAND ACCESS OFFERINGS
ADC's proposed acquisition of PairGain results from ADC's aggressive and
determined strategy to become a leading supplier of DSL broadband access
systems. The PairGain acquisition strengthens ADC's DSL market position. The
acquisition also expands ADC's local loop offerings of broadband access systems
with PairGain's Avidia(R) System, a next-generation digital subscriber line
access multiplexer (DSLAM) system. The combination of ADC's and PairGain's DSL
products results in a complete offering of local loop access, transport and
network management products based on HDSL, HDSL2, ADSL and SDSL technologies.
"Our acquisition of PairGain represents another significant step forward in
ADC's mission to enable communications service providers to serve their
residential and business customers with broadband, multiservice networks
offering faster, cost-effective and bundled Internet/data, video and voice
services. The power of this acquisition comes from joining ADC's comprehensive,
end-to-end systems leadership in broadband access with PairGain's strong
position and technology leadership in DSL products," said William J. Cadogan,
chairman and CEO of ADC. "The PairGain acquisition has many strategic benefits
and synergies for the customers, employees and shareowners of both companies.
First, it strengthens the position of the combined companies as a leading
supplier in the DSL broadband access market. Second, the PairGain acquisition
brings together the finest talent and expertise in the delivery of broadband,
multiservice communications over DSL. And third, it enhances ADC's `triple-play'
package of network equipment, software and integration services used by
broadband service providers to compete in the `last mile/kilometer' of
communications networks. These synergies and benefits strengthen our combined
teams of people to better assist our customers in meeting their goals of
deploying competitive bundles of broadband communications services to consumers
and businesses over high-speed network connections."
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ADC ACQUIRES PAIRGAIN TECHNOLOGIES, INC./3
The DSL market for business and residential communications is expected to be
fast growing. The DSLAM market is expected to grow at an annualized rate of 47%
from 1999 to 2003 according to the Yankee Group. Credit Suisse First Boston
reports that high-speed communications connections, such as HDSL, T3, frame
relay and optical lines, to businesses are growing at an annual rate of greater
than 30%. Additionally, a joint industry study by Sanford C. Bernstein & Co. and
McKinsey & Company forecasts DSL lines to residences and small businesses to
grow at a faster rate - from 300,000 lines in 1999 to over 2.5 million lines in
2000, then projected to 13.9 million lines by 2004.
"As a result of market deregulation and competition, the world's incumbent and
new competitive communications service providers are seeking innovative
approaches to win and retain customers," said Michael Pascoe, president and CEO
of PairGain. "The ADC-PairGain combination joins two companies with a shared
vision of helping service providers deploy broadband, multiservice
communications services to residences and businesses over high-speed
connections. PairGain augments ADC's strategy by providing a critical mass of
DSL broadband access systems, a large and dedicated customer base of incumbent
and new competitive communications service providers in a fast growing market,
and a skilled and driven team of industry professionals. ADC benefits PairGain
with its comprehensive offerings of network equipment, software and integration
services that add tremendous value to PairGain's customers and attractive growth
opportunities for PairGain's employees. We are thrilled to join the ADC team and
look forward to enhancing value to our shareowners by contributing to ADC's
broadband, multiservice network strategy."
PAIRGAIN'S TECHNOLOGY LEADERSHIP AND INNOVATIVE PRODUCTS
For more than 10 years, PairGain has been recognized as a technology leader and
industry innovator of telecommunications equipment. PairGain offers the widest
range of DSL-based systems available. More than 1.7 million PairGain DSL
circuits are installed in over 100 countries. PairGain's product lines for
high-bandwidth access, broadband access and subscriber carrier systems include:
o HIGH-BANDWIDTH ACCESS SYSTEMS
PairGain's high-bandwidth access systems include HDSL and HDSL2
technologies that establish T1/E1 (1.5 Mbps/2.0 Mbps) connections over the
existing infrastructure of copper telephone wires. These systems are
deployed by communications service providers to deliver high-speed
Internet/data and voice services to businesses.
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ADC ACQUIRES PAIRGAIN TECHNOLOGIES, INC./4
PairGain's new HDSL2 system set a standard for interoperability and
efficiency as one of the industry's first practical implementations of
HDSL2. Providing full-rate T1 access using just a single copper-pair cable,
compared to two copper-pair cables for HDSL, HDSL2 enables service
providers to quickly and cost effectively meet the demand for more
Internet/data and voice services - services that have become increasingly
hard to deliver due to the shortage of copper cable in the "last
mile/kilometer" of communications networks.
o BROADBAND ACCESS SYSTEMS
PairGain's broadband access offerings include the Avidia System, a
multiservice access platform, which is used for the deployment of numerous
services, including high-speed Internet access, remote local area network
(LAN) access and virtual private networks (VPN). The Avidia System is an
ATM edge switch that enables service providers and private network owners
to establish DSL access networks for their remote users and subscribers.
The Avidia System can be configured as a next-generation DSLAM, access
server or LAN extension concentrator, supporting G.lite, full-rate DMT
ADSL, SDSL, T1, IP voice and frame relay services, in addition to
supporting ATM over ADSL and Ethernet frames over SDSL. The product is NEBS
Level 3 compliant, a requirement for deployment in major telecom networks
in North America. The Avidia System delivers the service flexibility, port
density, deployment options and quality of service (QoS) guarantees
necessary for widespread deployment of broadband access services.
o SUBSCRIBER CARRIER SYSTEMS
PairGain's subscriber carrier systems provide communications service
providers worldwide with a modular solution for transmitting greater
capacity over existing copper telephone lines. These products deliver
up to 32 channels over one or two pairs of copper phone lines, so
service providers can meet the growing demand for additional phone,
fax and Internet/data lines in residential and business areas by
better utilizing existing copper-pair cables. PairGain subscriber
carrier products reduce equipment and labor costs associated with line
installation and provide a quick solution for filling service orders.
PairGain's sales for the year ended December 31, 1999 were $225 million.
PairGain's customers include incumbent and new competitive communications
service providers and enterprise organizations. PairGain has sales offices in
the U.S., Switzerland, Hong Kong, Dubai U.A.E., Canada, England, China and
Brazil.
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ADC ACQUIRES PAIRGAIN TECHNOLOGIES, INC./5
ABOUT ADC
ADC Telecommunications, Inc. is a leading global supplier of network equipment,
software and integration services for broadband, multiservice networks that
deliver data, video and voice communications over telephone, cable television,
Internet, broadcast, wireless and enterprise networks. ADC's broadband,
multiservice network solutions enable local access, high-speed transmission and
software management of communications services from service providers to
consumers and businesses over fiber-optic, copper, coaxial and wireless media.
Headquartered in Minneapolis, Minnesota, ADC has approximately 14,400 employees
around the world and annual sales of $2.1 billion. ADC's stock is included in
the Standard & Poor's 500 Index and the Nasdaq-100 Index. For additional
information, visit our Web site at www.adc.com.
ABOUT PAIRGAIN TECHNOLOGIES
PairGain Technologies, Inc. is the leader in the design, manufacture, marketing
and sale of DSL networking systems. Service providers and private network
operators worldwide use PairGain's products to deploy DSL-based services such as
high-speed Internet, remote LAN access and enterprise LAN extension. Additional
information about PairGain is available on the Internet at www.pairgain.com.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Any forward-looking statements contained herein reflect management's current
expectations or beliefs. ADC Telecommunications cautions readers that future
actual results could differ materially from those in forward-looking statements
depending on the outcome of certain factors, including the risks and
uncertainties identified in Exhibit 99-a to ADC's Report on Form 10-K for the
fiscal year ended October 31, 1999. PairGain Technologies cautions readers that
future actual results could differ materially from those in forward-looking
statements depending on the outcome of certain factors, including the risks and
uncertainties identified in PairGain's periodic Form 10-Q and Form 10-K filings
with the Securities and Exchange Commission.
