P-Com Inc. to merge with Telaxis Communications for 2.73 times revenue

Weekly Corporate Growth Report, Sep 16, 2002

Featured Transaction

The Deal: P-Com Inc. has agreed to merge with Telaxis Communications Corp in an all-stock transaction. Telaxis shareholders will receive 1.117 shares of P-Com for each share of Telaxis. Based on recent closing prices, the deal values Telaxis at approximately $5.2 million. The ratio of PCom shares to Telaxis shares is fixed and will not be adjusted for changes in either company's stock price. Based on current shares outstanding, P-Com holders will own about 62.5 percent of the combined company while Telaxis holders own the remaining 37.5 percent. The deal is expected to close in the fourth quarter.

Discussion: Telaxis is developing a line of broadband wireless networking gear intended to be used by Internet service providers to offer broadband Internet access where fiber optic lines cannot be run. The company discontinued its other product lines, which included wireless LAN and multiple-point distribution systems, after a major customer was acquired by another company and canceled all its orders.

P-Com provides microwave radio transmission equipment to telecommunications and Internet service providers as an alternative to laying cable. The company also provides engineering, installation support, program management, and maintenance services through its P-Com Network Services subsidiary. A little more than half of P-Com's sales are made outside of the United States.

The merger is intended to combine the technologies of both companies and to boost their presence in Asia, Latin America, and the Middle East.