CNT to Acquire Inrange for $190 Million

Storage networking specialist CNT Monday signed a definitive agreement to acquire Fibre Channel switchmaker Inrange Technologies for $190 million in cash.

Terms of the deal call for SPX Corp. , which owns 91 percent of Lumberton, N.J.'s Inrange, to sell its stake to CNT at $2.31 per Inrange share. The remainder of the shares will be acquired at the same price by a merger immediately following the acquisition from SPX.

If the deal reaches fruition, it will make Minneapolis's CNT one of the world's largest makers of storage networking products, solutions, and services. It would then have Fibre Channel switches and storage networking and wave division multiplexing products to sell alongside its ESCON, SCSI, and Fibre Channel-based IP and wide area network products.

One of several mergers or purchases made in an ever-consolidating storage market, the combined company would also be poised to become a global leader in SAN services, offering consulting, systems integration, network monitoring, traditional, and managed services.

Tony Prigmore, senior analyst at the Enterprise Storage Group, told CNT must seal the deal quickly.

"CNT will have to integrate and stabilize this acquisition quickly in order to successfully compete against the likes of McData, Brocade, and most recently Cisco," Prigmore said. "One of CNT's potential differentators could end up to be the combined services and solution capabilites.

Storage Area Networking (SAN) switches were a bright spot in IT spending last year, with worldwide sales growing 15 percent to $954 million, according to the Dell'Oro Group. Inrange had the fastest sales growth last year at 35 percent.

Jamie Gruener, senior analyst at the Yankee Group, said he predicted continued consolidaton for 2003 in the storage sector. He also said Cisco Systems, courtesy of its purchase of Andiamo last summer, would become a major force in Fibre Channel switching in a competitive field led by Brocade. Overall, the Yankee Group expects the storage networking market to reach $2.3 billion in 2003.

CNT's senior management is drawing up an integration plan and will work to realize synergies at the combined company, including eliminating redundant costs, integrating product services offerings, achieving operating efficiencies, and enhancing productivity.

CNT expects the combined firm to have a maintenance revenue stream of nearly $100 million and a $60 million consulting and professional services division.

"With Inrange, CNT will continue to offer an integrated product line of Fibre Channel Directors over a wide area network and will be a full-service solutions provider in the industry," comments Thomas G. Hudson, chairman, president and CEO of CNT. "This is exactly what enterprise customers need as a partner in the complex decision-making, large scale implementation and management of multi-vendor storage networking solutions. At a fair valuation, our shareholders will own an expanded global company with greater liquidity and enhanced growth opportunities."

CNT expects the acquisition to be accretive to earnings per share by at least 10 percent in 2003, with an annual cost savings of between $10 and $15 million to be fully phased in by early 2004. The deal is expected to close in the second quarter of 2003.

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