ADC Telecommunications (Nasdaq: ADCT), a supplier of network equipment, software and integration services for broadband networks, said Wednesday it would buy PairGain Technologies, Inc. (Nasdaq: PAIR) for about $1.6 billion.
Pairgain, which makes digital subscriber line (DSL) networking systems, saw shares rise 1 1/2 to 17 9/16, or 9 percent on the news. The stock has been volatile since November, when the company sold its chip design group to focus on its networking business.
ADC shares fell 3 1/2 to 43 5/16, or 7 percent. ADC stock rose recently after the company reported first quarter results.
Under the terms of sale, each share of PairGain common stock would be converted into 0.43 share of ADC common stock. Based on Tuesday's closing share price of $46.81 for ADC stock, the transaction is valued at about $1.6 billion.
The deal is expected to close during ADC's third fiscal quarter, to be accounted for as a pooling of interests. Buying PairGain won't affect earnings in 2000 and will add 5 cents per share in 2001 profits, ADC said.
The PairGain acquisition strengthens ADC's DSL market position and expands ADC's local loop offerings of broadband access, the companies said.
Last week, ADC chief executive William Cadogan said his company was in talks to buy several makers of optical components.