Expands Aviat's Private Networks Offering with
Private LTE/5G, Unlicensed Wireless Access Solutions
- Creates an integrated end-to-end offering for wireless access
and transport in the Private Networks segment
- Leverages Aviat's sales channel to address a $8 billion Private LTE/5G addressable market
- Increases Aviat's reach in mission-critical industrial Private
Networks
- Expected to be accretive to Gross Margin %, Adjusted EBITDA,
Non-GAAP EPS, and Free Cash Flow in first year
- Aviat to host conference call Thursday,
April 14th, at 8:30am
(ET)
AUSTIN, Texas and TORONTO, April 13,
2022 /PRNewswire/ -- Aviat Networks, Inc. ("Aviat")
(Nasdaq: AVNW)) , the leading expert in wireless transport
solutions, and Redline Communications Group, Inc. ("Redline") (TSX:
RDL), a leading provider in mission-critical data infrastructure,
announced today that they have entered into an arrangement
agreement (the "Arrangement Agreement") under which Aviat will
acquire all outstanding shares of Redline for CAD$0.90 per common share (approximately
USD$0.71 per share), in an all-cash
transaction (the "Transaction") valued at approximately CAD
$16.2 million (approximately
USD$12.9 million). Aviat expects to
fully fund the acquisition from cash on hand. Subject to customary
closing conditions and necessary regulatory approvals, the
transaction is expected to close within four months.
Commenting on the Transaction, Pete
Smith, Aviat CEO, said, "This is an exciting opportunity for
both Aviat and Redline. The acquisition expands Aviat's share
in private networks by adding Redline's wireless network access
capabilities in industrial PTP/PTMP and licensed Private LTE and 5G
to Aviat's existing wireless transport backhaul solutions. Redline
products will leverage Aviat's sales and marketing presence for
broader reach. Likewise, Aviat will benefit from Redline's presence
in the Oil & Gas, and Transportation verticals."
Smith continued, "We expect this deal to be immediately
accretive to Aviat's gross margin %, Adjusted EBITDA, non-GAAP EPS,
and Free Cash Flow all in the first year. We look forward to
finalizing this transaction which we believe will generate
significant value for our shareholders."
Richard Yoon, President and CEO,
Redline added that, "Aviat is a great partner for Redline. We
look forward to leveraging our portfolio in conjunction with
Aviat's global scale."
This Transaction is expected to provide both Aviat and Redline
customers with a broader, more integrated portfolio of wireless
access and transport solutions and reinforces Aviat's roadmap and
commitment to the future of Private Networks as the environment
evolves to 5G and beyond.
Transaction Details
Aviat intends to fund the acquisition with cash from the balance
sheet.
Aviat and Redline will run independently until the closing of
the Transaction.
The Transaction will be carried out by way of a Court-approved
plan of arrangement (the "Arrangement") under the Canada Business
Corporations Act, pursuant to which Aviat will acquire all the
outstanding common shares of Redline (the "Redline Shares"). The
implementation of the Arrangement will be subject to the approval
of at least 66 2/3% of the votes cast by Redline shareholders
present in person or represented by proxy at the annual general and
special meeting of Redline shareholders (the "Meeting") and a
majority of all of the votes cast by Redline shareholders present
in person or represented by proxy at the Meeting after excluding
votes of certain persons whose votes must be excluded in accordance
with Canadian Multilateral Instrument 61-101 – Protection of
Minority Security Holders in Special Transactions, and the receipt
of applicable approvals from the Ontario Superior Court of Justice.
The implementation of the Arrangement will also be subject to the
completion of a reduction in the stated capital of the Redline
Shares, which will require the approval of at least 66 2/3% of the
votes cast by Redline shareholders present in person or represented
by proxy at the Meeting.
The Arrangement Agreement provides for, among other things,
customary representations, warranties and covenants, including a
non-solicitation covenants from Redline, subject to customary
"fiduciary out" provisions that allow Redline to accept a superior
proposal in certain circumstances and a five-business day "right to
match period" in favour of Aviat. The Arrangement Agreement
also provides for the payment of a termination fee of CAD$ 0.65 million to Aviat in the event the
Transaction is terminated in certain specified circumstances,
including if Aviat does not exercise its right to match in the
context of a superior proposal supported by Redline. The completion
of the transaction is not subject to any financing condition.
All directors and executive officers of Redline and certain
other shareholders of Redline, holding approximately 29.7% of the
issued and outstanding Redline Shares as of the date hereof, have
entered into voting and support agreements in favour of Aviat
pursuant to which, among other things, they have agreed to vote
their Redline Shares in favour of the Transaction.
A management information circular relating to the Meeting and
containing further details regarding the Arrangement and the
Arrangement Agreement will be mailed to Redline shareholders and
made available on SEDAR under Redline's profile at
www.sedar.com. Further details related to the
Transaction can be also found on the Investor Relations tab at
www.aviatnetworks.com.
Board of Director Approvals
The Transaction has been unanimously approved by Aviat's Board
of Directors.
Redline's Board of Directors established a Special Committee of
independent directors (D. Neil
McDonnell and Josef Vejvoda)
to oversee the Transaction discussions and the Arrangement. The
Special Committee unanimously recommended the Transaction to the
Board of Directors, and the full Board of the Directors of Redline
unanimously approved the Transaction, determined that the
Transaction is fair to Redline shareholders and in the best
interests of Redline, and passed a resolution to recommend that
Redline shareholders vote in favour of the Transaction. Evans &
Evans, Inc , financial advisor to Redline, has provided a fairness
opinion to the Board of Directors of Redline that, subject to the
assumptions, limitations and qualifications set out in such
fairness opinion, the Consideration to be received by Redline
shareholders pursuant to the Transaction is fair from a financial
point of view to Redline shareholders.
D. Neil McDonnell, Chair of the
Company's Board of Directors and Special Committee, commented: "We
are pleased to announce our acquisition by Aviat, which
strategically aligns Redline with a proven market leader, providing
access to additional customers and markets and generating
operational efficiencies. After careful deliberation, the Special
Committee and Redline's Board of Directors have unanimously
concluded that the Transaction is fair to Redline's shareholders
from a financial point of view offering an opportunity to monetize
their investment and is in the best interests of Redline and its
employees."
The Arrangement Agreement will be available on SEDAR under
Redline's profile at www.sedar.com within 10 days following the
date of this press release.
Conference Call
Aviat will host a conference call for investors and industry
analysts to discuss the transaction at 8:30am (ET) Thursday, April 14th.
To listen to the live conference call, please dial toll-free
(US/CAN) 800-289-0438 or toll-free (INTL) 1 323-794-2423 conference
ID: 8638497. We ask that you dial-in approximately 10 minutes prior
to the start time.
About Aviat Networks
Aviat Networks, Inc. is the leading expert in wireless
transport solutions and works to provide dependable products,
services and support to its customers. With more than one million
systems sold in 170 countries worldwide, communications service
providers and private network operators including state/local
government, utility, federal government and defense organizations
trust Aviat with their critical applications. Coupled with a long
history of microwave innovations, Aviat provides a comprehensive
suite of localized professional and support services enabling
customers to simplify both their networks and their lives. For more
than 70 years, the experts at Aviat have delivered high-performance
products, simplified operations, and the best overall customer
experience. Aviat Networks is headquartered
in Austin, Texas. For more
information, visit www.aviatnetworks.com or connect
with Aviat
Networks on Twitter, Facebook and LinkedIn.
About Redline Communications
Redline Communications (TSX:RDL) designs and manufactures
powerful wide-area wireless networks for mission-critical
applications in challenging locations. Redline networks are used by
Oil & Gas companies onshore and offshore, Mining companies on
surface and underground operations, by municipalities to remotely
monitor infrastructure, and by specialized telecom service
providers to deliver premium services. Thousands of businesses
worldwide rely on Redline to engineer, plan and deliver ruggedized,
secure and reliable networks for their IoT, voice, data, and video
communications needs. For more information
visit www.rdlcom.com.
Forward-Looking Statements
The information contained in this document includes
forward-looking statements within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995, and "forward looking information" under the provisions of
Canadian provincial securities laws. Such statements
include with respect to Aviat and Redline, their beliefs and
expectations regarding the ability to close the Transaction,
the ability to obtain the approval of Redline shareholders, the
satisfaction of other conditions to the closing of the Transaction
on proposed terms and in the time assumed, expectations regarding
business conditions, new product solutions, customer positioning,
revenue, future orders, bookings, new contracts, cost structure,
operating income, profitability in fiscal 2022, process
improvements, realignment plans and review of strategic
alternatives. All statements, trend analyses and other
information contained herein regarding the foregoing beliefs and
expectations, as well as about the markets for the services and
products of Aviat and Redline and trends in revenue, and other
statements identified by the use of forward-looking terminology,
including, without limitation, "anticipate," "believe," "plan,"
"estimate," "expect," "goal," "will," "see," "continue,"
"delivering," "view," and "intend," or the negative of these terms
or other similar expressions, constitute forward-looking
statements. Forward-looking statements are neither historical facts
nor assurances of future performance. Instead, forward-looking
statements are based on estimates reflecting the current beliefs,
expectations and assumptions of the senior management of Aviat
and Redline regarding the future of its business, future plans and
strategies, projections, anticipated events and trends, the economy
and other future conditions. Such forward-looking statements
involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by the
forward-looking statements. Forward-looking statements should
therefore be considered in light of various important factors,
including those set forth in this document. Therefore, you should
not rely on any of these forward-looking statements. Important
factors that could cause actual results to differ materially from
estimates or projections contained in the forward-looking
statements include the following:
- the ability to close the Transaction;
- the ability of Redline to obtain the approval of Redline
shareholders and the satisfaction of other conditions to the
closing of the Transaction on proposed terms and in the time
assumed;
- the impact of COVID-19 on our business, operations and cash
flows;
- continued price and margin erosion as a result of increased
competition in the microwave transmission industry;
- the impact of the volume, timing, and customer, product, and
geographic mix of our product orders;
- the timing of our receipt of payment for products or services
from our customers;
- our ability to meet projected new product development dates or
anticipated cost reductions of new products;
- our suppliers' inability to perform and deliver on time as a
result of their financial condition, component shortages, the
effects of COVID-19 or other supply chain constraints;
- the effects of inflation and the timing and extent of changes
in the prices and overall demand for and availability of our
inputs;
- customer acceptance of new products;
- the ability of our subcontractors to timely perform;
- weakness in the global economy affecting customer
spending;
- retention of our key personnel;
- our ability to manage and maintain key customer
relationships;
- uncertain economic conditions in the telecommunications sector
combined with operator and supplier consolidation;
- our failure to protect our Intellectual property rights or
defend against Intellectual property infringement claims by
others;
- the results of our restructuring efforts;
- the ability to preserve and use our net operating loss
carryforwards;
- the effects of currency and interest rate risks;
- the effects of current and future government regulations,
including the effects of current restrictions on various commercial
and economic activities in response to the COVID-19 pandemic;
- general economic conditions, including uncertainty regarding
the timing, pace and extent of an economic recovery in the United States and other countries where we
conduct business;
- the conduct of unethical business practices in developing
countries;
- the impact of political turmoil in countries where we have
significant business;
- the impact of tariffs, the adoption of trade restrictions
affecting our products or suppliers, a United States withdrawal from or significant
renegotiation of trade agreements, the occurrence of trade wars,
the closing of border crossings, and other changes in trade
regulations or relationships; and
- Aviat's ability to implement its stock repurchase program or
the extent to which it enhances long-term stockholder value.
For more information regarding the risks and uncertainties for
Aviat's business, see "Risk Factors" in Aviat's Annual Report on
Form 10-K filed with the U.S. Securities and Exchange
Commission ("SEC") on August 25, 2021 as well as other
reports filed by Aviat with the SEC from time to
time. For additional information on the risks and
uncertainties for Redline's business and the Arrangement, see
Redline's most recently filed Annual Information Form and Annual
Management Discussion & Analysis, which are available on SEDAR
at www.sedar.com and on Redline's website at www.rdlcom.com.
Neither Aviat nor Redline undertakes any obligation to update
publicly any forward-looking statement, whether written or oral,
for any reason, except as required by law, even as new information
becomes available or other events occur in the future.
For further information:
Aviat Contact(s):
Investor Relations:
Keith
Fanneron
Vice President Global Finance & Investor Relations
Phone: (512) 861-1022
Email: keith.fanneron@aviatnet.com
Redline Contact(s):
Richard Yoon
Chief Executive Officer
+1-905-479-8344
ryoon@rdlcom.com
Investor Relations:
Ron
Shuttleworth
Partner
OakHill Financial
+1-647-500-7371
rshuttleworth@oakhillfinancial.ca
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SOURCE Aviat Networks, Inc.
