DragonWave announced the closing of the acquisition of Nokia Siemens Networks' microwave transport business including its associated operational support system (OSS) and related support functions. The acquisition was effected pursuant to the Amended and Restated Master Acquisition Agreement between DragonWave Inc., its wholly-owned subsidiary DragonWave S.a r.l. and Nokia Siemens Networks dated May 3, 2012 (the "Master Acquisition Agreement").
Nokia Siemens Networks retains responsibility for its existing solution sales and associated services for microwave transport, while DragonWave is responsible for the microwave transport product line, including R&D, product management and operations functions. As previously announced on May 3, 2012, Nokia Siemens Networks will continue to provide R&D and other support to the business through a services arrangement.
As part of the acquisition, DragonWave is now the preferred strategic supplier of packet microwave and related products to Nokia Siemens Networks and the two companies will jointly coordinate technology development activities. DragonWave plans to rebrand the products acquired from Nokia Siemens Networks as "Harmony" products. Under the terms of the Master Acquisition Agreement, DragonWave will continue the support and development of these products, which will also be sold via Nokia Siemens Networks under the FlexiPacket brand through its existing channels as part of its end-to-end mobile broadband solution set.
"In closing this acquisition, we've established a new level of collaboration with Nokia Siemens Networks that positions DragonWave strategically for continued growth," said DragonWave President and CEO Peter Allen. "The new Harmony line we're adding to our portfolio is backed by unmatched service and support and further bolsters our ability to participate in the tremendous growth in LTE networks worldwide."
The business was acquired by one of DragonWave's wholly-owned subsidiaries, DragonWave S.a r.l. The purchase price consists of EUR10.6 million in cash, subject to customary post-closing adjustments, and 2,000,978 common shares of DragonWave. Under the Master Acquisition Agreement, Nokia Siemens Networks is subject to a lock-up restricting sale or disposition of the shares, subject to customary exceptions. The Master Acquisition Agreement also includes a capital lease or similar deferred sale agreement from Nokia Siemens Networks to DragonWave of approximately EUR3.9 million of equipment.
Concurrently with the closing of the acquisition, DragonWave has also established a new credit facility with Comerica Bank and Export Development Canada. The credit facility is available to finance the completion of the acquisition and DragonWave's working capital requirements. The credit facility is for a total of US$40 million, of which DragonWave has drawn US$35 million as of June 1, 2012. DragonWave also has access, subject to ongoing compliance with borrowing covenants, to US $20 million in additional credit (for total maximum credit of US $60 million). The new credit facility matures on May 31, 2014 and is secured by a first-priority charge on all of the assets of DragonWave and its principal direct and indirect subsidiaries. Borrowing options under the credit facility include US dollar, Canadian dollar and Eurodollar loans. Interest rates vary with market rate fluctuations, with loans bearing interest in the range of 3-4% above the applicable base rates. The terms of the credit facility include other customary terms, conditions, covenants, and representations and warranties.
The acquisition of certain Chinese operations associated with the business is expected to be completed in the second half of 2012, subject to compliance with local Chinese regulatory requirements. Approximately 130 employees of Nokia Siemens Networks based in Shanghai (China) are expected to transfer to DragonWave once the closing of the acquisition of operations in China is complete.