Ascend continues merger trend with Cascade buy

Ascend Communications Inc. and Cascade Communications Corp. have announced an agreement under which Ascend will acquire Cascade in a stock swap valued at US$3.7 billion. The deal continues a spending spree in which Ascend, best known as a provider of remote networking solutions, has sought to broaden its product line.

Ascend Communications Inc. and Cascade Communications Corp. have announced an agreement under which Ascend will acquire Cascade in a stock swap valued at US$3.7 billion.

The deal would add Cascade's frame relay and (ATM) Asynchronous Transfer Mode switch offerings to the product line of Ascend, a provider of remote networking solutions.

Billed by the companies as one of the largest mergers in the history of the networking industry, the deal still pales in comparison with 3Com Corp.'s announcement in late February that it would form a $5 billion networking giant through a $6.6 billion stock swap with remote access specialist U.S. Robotics Inc.

Under the terms of yesterday's agreement, each share of Cascade common stock will be exchanged for 0.7 of a share of Ascend common stock, the companies said.

Ascend shareholders will own approximately 65% and Cascade shareholders approximately 35% of the combined company, which will retain the Ascend name and which will have its headquarters in Alameda, California.

The deal is subject to government approval and to approval by both companies' shareholders. Ascend expects to recognise a one-time charge related to certain merger costs and related expenses in this year's third quarter, when the deal is expected to close.

"Ascend and Cascade share a common vision of an emerging network infrastructure that delivers end-to-end networking solutions to a broad base of customers," Mory Ejabat, Ascend's president and CEO, said in a statement.

Ejabat will continue as Ascend's president and CEO, once the transaction is completed, the companies said.

Ascend has been on a spending spree to broaden its product line. Last month it pledged approximately US$70 million to purchase Whitetree Inc., a developer of high-speed LAN switching products based on Ethernet and ATM technology. In January, it spent US$29 million for StonyBrook Services Inc. to acquire its network management applications.

Following the merger, Ascend will reorganise into four main business units: Multimedia Access Products, Remote Products, Access and Concentrator Products, and Core Switching Systems.

Cascade's President and CEO Dan Smith will join the company as executive vice president and general manager of the Core Switching Systems unit and will be responsible for all ATM, frame relay and IP switching products, including Ascend's family of GRF IP switches.

"By providing an integrated set of products, we will, for the first time, allow network service providers to quickly and cost-effectively deploy, provision and deliver network services which will support the evolving needs of their customer base," Smith said in a statement.

In a separate announcement, Cascade yesterday said that it expects to earn revenues of $90 million for the first quarter of 1997, ended March 29, below analysts' expectations but higher than the $56 million it posted for the same period in 1996.

Ascend and Cascade will separately announce final results for the first quarter on April 10, the companies said.

Ascend can be reached at http:/www.ascend.com/. Cascade is at http://www.casc.com/.

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