(Reuters) - Voice and data communication equipment maker Sonus Networks (SONS.O) will buy smaller rival Network Equipment Technologies (NET) NWK.O for $41.3 million to tap into the government segment.
Sonus will pay $1.35 per share for the networking equipment provider, a premium of 14.4 percent to NET’s Monday closing price.
NET, which got 50 percent of its total revenue from government customers last year, counts the U.S. Department of Defense, the U.S. Army, NASA and the U.K Ministry of Defense among its customers.
“NET has a long history of selling to U.S. and foreign governments which presents a new vertical market opportunity for Sonus,” Sonus Chief Executive Ray Dolan said on a conference call.
NET shares rose more than 12 percent at a six-month high of $1.34 on Tuesday on the Nasdaq.
Nearly 3.8 million NET shares changed hands in the first 20 minutes of trade on Tuesday, compared to their ten-day average trading volume of 23,464.
NET is also a key enabler of Microsoft’s (MSFT.O) unified communication solutions, which boosts Sonus’s ability to address the growing market, CEO Dolan said.
Sonus expects the deal to add about $15 million to $20 million to its revenue in the second half of fiscal 2012.
If the deal adds $20 million to Sonus’ revenue, it will have no impact on or will slightly add to its adjusted earnings in the second half, the company said.
However, if it adds only $15 million, adjusted earnings will be hit by about 1 cent per share.
The all-cash deal is expected to close in the third quarter of 2012.
Sonus shares were trading flat at $2.35 on Tuesday on the Nasdaq.
Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Sreejiraj Eluvangal