Two pioneers in the next generation of communications technology said Wednesday they’ll join forces.
Aurora-based Westell Technologies Inc. said it will merge with Amati Communications Corp. in a stock-swap deal valued at about $394 million for Amati shareholders.
Amati will keep its name and operate as a subsidiary of Westell, with James Steenbergen remaining as chief executive officer.
Amati shareholders will get 0.9 shares of Westell stock for each share of Amati. Based on Tuesday’s closing price for Westell, that puts the value of Amati at $19.97 a share. Amati closed Tuesday at $18.69, almost a two-year high. After the deal is completed, pending approval by shareholders of both companies, Amati’s shareholders will own about a third of Westell’s outstanding stock.
Westell’s stock closed Wednesday at $23.19, up $1. Amati closed at $19.12, up 44 cents.
The combined company will have a market capitalization of about $1.2 billion, said Steve Hawrysz, Westell’s chief financial officer.
Both companies are developing a technology called digital subscriber line, or DSL, that can send information at high speeds over conventional telephone lines.
Westell and Amati have been developing different versions of DSL technology, and both have been test-marketing specific applications with various partners in markets around the world. Schaumburg-based Motorola Inc. and Texas Instruments Inc. are among the communications giants that have joined forces with one or both of the companies to bring the technology to market.
The two versions of DSL being developed by Westell and Amati are the dominant ones to date. Gary Seamans, chief executive of Westell, said the merged company will have the resources to be the lowest-cost provider of the technology.
Wall Street has been impatient to see marketable products for the technology. Westell’s stock took a beating last year after the company failed to get contracts with phone companies to market the technology. At one point the stock traded as low as $8.62. Some analysts questioned whether the company could survive without a strong partner.
The company has also been operating in the red. For the first quarter of fiscal 1998, ended July 24, Westell reported a net loss of $4.5 million, or 12 cents a share, more than double the year-earlier period. Revenues for the quarter were $19.3 million, down more than 4 percent from a year earlier.
But Westell stock has rebounded as it announced alliances with major customers and as telephone companies have gotten closer to introducing high-speed data networks that will use DSL technology.
Amati, based in San Jose, Calif., reported a net loss of $6.4 million, or 33 cents a share, for the fourth quarter of 1997, ended Aug. 29.
That compared with a net loss of $2.2 million, or 13 cents a share, for the fourth quarter of the previous year. Revenues for the quarter were $2 million, down 18 percent from $2.5 million a year earlier.
A week ago, Amati announced a cross-licensing agreement with Alcatel, part of the Alcatel Alsthom group. Alcatel makes a broad range of communications-related equipment. Westell said the merger will not change that relationship.
