Access Beyond, Hayes sign merger agreement

Electronic News, August 11, 1997 by Bernard McAleer

Gaithersburg, Md., and Norcross, Ga.--Access Beyond, Inc., a maker of remote access connectivity products, and privately held Hayes Microcomputer Products, Inc. signed a definitive merger agreement on July 30. Under the terms of the agreement, Access Beyond will be renamed Hayes Communications, Inc., to be based in Norcross, Ga., with its stock continuing to be traded on Nasdaq. Both companies plan to maintain current facilities, a company spokesman said, with Access operations in Maryland and New Jersey likely to focus on research and development.

Access Beyond, currently with approximately 12.5 million shares outstanding, will issue approximately 45 million shares of its common stock for all outstanding shares of Hayes. Based on Access Beyond's closing price on July 29, the combined company would have a market capitalization of approximately $339 million. The transaction will be treated as a tax-free reorganization to the shareholders. The merger, expected to be completed before the end of 1997, will be subject to due diligence, regulatory and final shareholder approval from both companies. Access Beyond shareholders will own approximately 21 percent of the new company's outstanding shares, with Hayes shareholders owning the remaining 79 percent, based on current outstanding shares.

Gaithersburg, Md.-based Access Beyond was spun off last fall from the remote-access products operation of Penril DataComm Networks, Inc., which merged with Bay Networks, Inc. Access Beyond had net sales of $15.2 million in the first nine months of fiscal 1997, compared with $26.3 million reported by Penril in the comparable period of fiscal 1996.

A pioneer in the modem market, Hayes went into bankruptcy in 1994 and emerged last year. Hayes was bought by Boca Research in a $29.7 million stock deal in 1995. In 1996, Hayes closed down its Thousand Oaks, Calif., operations, consolidating manufacturing at its Norcross headquarters.

Hayes is largely owned by founder and chairman Dennis C. Hayes and investors in Hong Kong and Singapore who provided fresh capital during the company's Chapter 11 restructuring. The combined entity is expected to have revenues of approximately $277 million. Revenue for Hayes in the first half of 1997 was $94.9 million, down 35 percent from $145.6 million in the same period of 1996.

"Hayes is looking to reinvent itself, because the modem market has not been too kind to Hayes," said Jeremy Duke, an analyst specializing in communications and networking at In-Stat. "And in terms of market opportunity, the opportunity today that Hayes could plug into is the remote access server business. And the access concentrator business has been growing at a double-digit growth rate quarter to quarter for the last five quarters. It's over $2 billion this year."

Dennis Hayes will become chairman of Hayes Communications; with Ron Howard, chairman and CEO of Access Beyond, set to become vice-chairman and executive VP of Business Development. Joseph Formichelli, president and CEO of Hayes, will become president and CEO of the new company. Together, they will form the senior management committee of Hayes Communications.

"The new company to emerge from this marriage will quickly become known as a strong innovator in the burgeoning remote access marketplace," Mr. Howard said.

In addition, Hayes Microcomputer Products has signed a commitment letter with an unidentified potential investor, in which Hayes Microcomputer Products would receive a $30 million cash infusion for approximately 11.7 percent of the company. This investment values Hayes at approximately $255 million before the merger with Access Beyond, and the proceeds will be used for debt reduction and working capital purposes. If the financing closes prior to the closing of the merger transaction, the companies have agreed that it will be mutually dilutive.

Access Beyond and Hayes have been operating for several months under an agreement which established an OEM relationship, as well as joint R&D and manufacturing programs between the two companies. Hayes had planned to resell a new Access Beyond product line. Mr. Howard said that Mr. Hayes broached the idea of a merger in the course of that venture.