Aviat Networks Acquires NEC's Wireless Transport Business

"The transaction advances Aviat's strategic goal to create the leading wireless transport specialist and to add meaningful scale to our business," said Pete Smith, CEO of Aviat Networks.  "NEC's wireless transport solutions brand, PASOLINK, is recognized by customers around the world for its leading quality and reliability. The addition of NEC's wireless transport business to Aviat's portfolio of high-power, mission critical radios, all-outdoor microwave and multi-band radios, advanced microwave routers and software offerings will create a compelling solution set for any customer. Aviat and NEC possess highly complementary customers and markets and the combination will enable Aviat to pursue select new Tier 1 business. The increased scale and capabilities will enable Aviat to compete even more effectively against the large generalists and fiber backhaul providers."

This acquisition will bring three immediate and significant benefits for Aviat, our combined customers and our shareholders:

• Improvement to scale. Aviat anticipates an additional $150 million in revenue which will be accretive to adjusted EBITDA, non-GAAP EPS, and free cash flow by the end of the first year and we anticipate getting the acquired business to 11-13% EBITDA by the end of year two. Complimentary businesses and learnings from the 2019 channel partnership with NEC in North America will result in cost synergies that will pay for the acquisition. With little overlap in product offering and very few common accounts, we expect sales synergy opportunities in both Aviat and NEC customers, which represent upside not factored into our financial model;
• Enhanced product portfolio with greater capability to innovate. The combined product and Intellectual Property (IP) portfolios will boost innovation and create a broader technology set to significantly increase the reach of Aviat's global business. Aviat will have additional scale to extend its leadership in innovation by utilizing the product roadmap and next-generation initiatives from the two companies; and
• A more diversified business. The combined business would service over 20 Tier 1 service providers worldwide and be a leader in private networks.  With over 3 million PASOLINK unit shipments worldwide, Aviat's business will have increased exposure to global 5G spend and private network opportunities that will further diversify Aviat's business into fast-growing international markets with significant growth opportunities.

"As a leader in the field of wireless transport, NEC has accumulated many years of advanced technologies and knowledge by providing solutions to a wide range of customers around the world," said Takayuki Morita, President and CEO, NEC Corporation. "Today, we are confident that this business integration with Aviat will enable customers to be provided with even more valuable solutions."

Aviat and NEC have a history of collaborating. In 2019, the two companies entered into an agreement for Aviat to serve as the channel partner for NEC in North America. "The transaction announced builds off the relationship established between Aviat and NEC in 2019 and is proof that Aviat is capable of executing a seamless transition for NEC customers and employees," continued Mr. Smith. "We are eager to bring our best-in-class services and operations to NEC customers worldwide and implement the Aviat Operating Model to drive continuous improvement."

Both sides are committed to providing customers with a smooth transition period without service disruption and with the ultimate goal of a better customer experience as a result of the transaction.

The transaction has been approved by the board of directors of both companies and is subject to customary closing conditions, including regulatory approvals. Aviat expects the deal to close in the third calendar quarter of 2023. The deal consideration is $45.0 million in cash and $25.0 million in Aviat stock. Aviat expects to fully fund the cash portion of the acquisition from committed debt financing. Aviat will appoint a board member designated by NEC to Aviat's board of directors, helping to ensure the success of the transaction.

Source: Aviat Networks media announcement