Siemens said on Thursday it had agreed to buy U.S.-based Efficient Networks in a deal valued at $1.5 billion. The acquisition bolsters the German company's position in the broadband access arena.
The Munich-based engineering and electronics giant said it would pay $23.50 per share in cash, a 90 percent premium to Efficient's (Nasdaq: EFNT) closing price Wednesday of $12.38. Siemens paid a hefty premium for Efficient, but the company is well off its high of $186.81. Efficient makes broadband networking equipment, including digital subscriber line (DSL)gear, for small- and medium-sized businesses.
Efficient's shares rocketed on the news. The stock jumped $10.87, or 86 percent, to $23.25 in early trading Thursday.
Under the deal, which is expected to close in April 2001, Efficient founder and chairman Mark Floyd will stay on at Siemens, and assume the position of President of Siemens Information and Communications Networks Access Solutions division.
In a statement, Siemens said the acquisition would strengthen its networks division and improve its prospects of becoming one of the top three suppliers in the broadband networks market. Since Efficient is a small company, the acquisition isn't expected to hurt Siemens' earnings. However, Siemens said its current expansion drive in the broadband and mobile phone sector would impact on earnings in the immediate future.
Siemens CEO Heinrich von Pierer said the company sees double-digit growth in sales and orders in 2001, with earnings growing faster than sales.
In its most recent quarter, Efficient posted a smaller-than-expected loss, beating reduced analyst numbers. Revenue, however, fell short of estimates.
The company posted sales of $394 million for 2000.
Separately, Efficient Networks also said it will provide DSL modems to SBC Communications (NYSE: SBC). Efficient said the deal with SBC covers one year with two one-year extensions. Efficient Networks has been supplying DSL modems to SBC since an initial agreement in October 1999.
Analysts were generally upbeat about Siemens acquisition of Efficient Networks. "We expect Efficient to be a major beneficiary of the worldwide growth in DSL deployment, and are continuing our Buy rating," said Eric Willer, an analyst with Hoak Breedlove Wesneski & Co.
Reuters contributed to this report.