Ciena buying ONI Systems

February 18, 2002 Posted: 1248 GMT

NEW YORK (CNN/Money) -- Ciena Corp. said Monday it is acquiring fellow optical networking equipment maker ONI Systems in a stock-swap deal valued at $900 million.

Under terms of the deal, each ONI holder will receive 0.7104 share of Ciena for each share tendered. Based on Friday's closing stock prices, the deal values the ONI shares at $6.20 each, an 11 percent premium.

Ciena (CIEN: Research, Estimates)  said ONI holders will represent about 24 percent of the newly combined company.

"Together, we can combine our efforts, consolidate our resources and target new marketing opportunities," said Ciena CEO Gary Smith in a statement. "As a result, we expect to accelerate Ciena's return to profitability."

Ciena said its expects the transaction to result in cost savings of $55 million to $65 million a year. It estimated that the newly combined company had about $1.3 billion in cash as of January.

The boards of both companies have approved the deals, and ONI executive officers and directors have agreed to vote their approximately 11.5 percent interest in favor of the deal when shareholders vote on it, Ciena said. The companies expect to close the deal in either the second or third quarters of this year, with the newly combined entity retaining the Ciena name and the company's Linthicum, Md., headquarters.

Ciena shares closed Friday at $8.73, down 39 cents. ONI (ONIS: Research, Estimates) , based in San Jose, Calif., rose 19 cents to $5.51.