Nortel Buys Architel for $395 Million

Nortel Networks is seeking to expand its Preside portfolio by aquiring Architel Systems Corp..

On Wednesday, the two companies announced that Nortel Networks (NT) will acquire all of the common shares of Architel (ASY) for an estimated $395 million in stock. The companies said the agreement would create opportunities for service providers and their customers to profit from the rapid growth of electronic commerce.

The transaction, which is expected to close in early third quarter, is subject to regulatory and shareholder approval. It is expected to be neutral to Nortel Networks earnings per share in calendar year 2000 and slightly accretive in calendar year 2001. The board of directors of both companies have approved the transaction.

If the transaction fails to proceed in certain circumstances, Nortel Networks will be entitled to receive either a US$12 million termination fee or the benefits of an option to acquire a 19.9 percent common share interest in Architel.

Nortel Networks will exchange 0.21 of a common share for each Architel share. At closing, however, if the value of Nortel Networks common shares is below $83.81, Nortel Networks will pay $17.60 in Nortel Networks common shares for each share of Architel. If the value of Nortel Networks common shares is above US$125.71, Nortel Networks will pay US$26.40 in Nortel Networks common shares for each Architel share, on a fully-diluted basis.

Architel, founded in 1984 and headquartered in Toronto, develops and supports software systems that allow service providers to rapidly provide Internet and other next-generation Internet Protocol services. It has approximately 400 employees and a global business, with customers in the Americas, Europe, and Asia.

“Today’s acquisition will provide us with first mover advantage in the market for the critical software and service-enabling solutions needed to create and run the high performance Internet,” said Steve Nicolle, vice president of Service Ware Solutions, Nortel Networks.

“Preside and Architel represent a market making combination that will enable service providers to leverage opportunities afforded by the high performance Internet faster. We will move to dramatically reduce their time-to-revenue and time-to-profit.”

Preside will enable applications like virtual private networks (VPNs) or eBusiness websites to work seamlessly with any connection medium, optical, cable, wireless or high-speed Digital Subscriber Link (DSL) service, allowing service providers to offer a one-stop shop in delivering bundled services to businesses and consumers. Businesses and consumers will be able to overcome the cost, complexities and delays of implementing these leading-edge high-speed Internet services, while service providers boost their revenue opportunities dramatically.

Architel’s software will become a key component of Preside. It will automate the service provisioning process, enabling service providers to provision and activate services for individual customers in minutes, instead of the weeks or months it takes in many networks. According to the two companies, Architel’s solutions maximize the return of new value-added services such as high-speed DSL service, voice over DSL, hosted applications, multimedia applications, and virtual private networks.

Nortel Networks said Architel’s technology complements Nortel Networks existing Preside portfolio and recently acquired customer care solutions from Clarify, providing a fast, responsive and seamless integrated bridge between the customers, the services they want to use and the network that underlies the Internet.

“Nortel Networks is a great strategic fit for Architel,” sa

id Stuart Griffith, president and CEO of Architel.

“Architel is very focused on building next-generation service delivery solutions for the largest carrier-grade IP networks, and we see Nortel Networks global reach, marketing and sales power as the best way to leverage those capabilities.”

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