Avaya Agrees to Buy Germany's Tenovis

Tuesday, October 5th 2004, 10:05 am

By: News On 6

BASKING RIDGE, N.J. (Ap) _ Business communications software provider Avaya Inc. said Tuesday that it agreed to purchase Tenovis GmbH & Co., a German provider of voice and data communications systems for European small and mid-sized business customers, from affiliates of Kohlberg Kravis Roberts & Co.

Avaya will pay about $370 million in cash for Tenovis, and assume about $265 million in debt. After the acquisition is completed, Avaya expects international revenues will account for about 40 percent of its total sales, up from 25 percent presently. The company's European revenues will nearly triple, growing from about 12 percent to about 30 percent of Avaya's global business. When fully integrated, Avaya expects Tenovis will add about $1 billion in annual revenues to Avaya.

Avaya, which has 16,900 employees, posted a loss of $88 million on sales of $4.34 billion in 2003.

``The acquisition of Tenovis significantly enhances Avaya's size and scale in Europe, and is a major step in Avaya's plan to grow its business globally,'' said Don Peterson, chairman and CEO of Avaya. ``Tenovis brings Avaya an integrated sales and services organization and an extensive customer base in Europe.''

Tenovis, headquartered in Frankfurt, Germany, provides communications services, including telephony, call and contact centers, customer relationship management, messaging, networking and services to companies and public authorities across Europe. The company has more than 5,400 employees at offices in Austria, Belgium, France, Germany, Italy, Spain, Switzerland and the Netherlands.

In connection with the acquisition, Avaya will assume certain employee-related benefit obligations and record as liabilities two sale/leaseback obligations totaling about $90 million.

The company said the deal will add 7 cents per share to earnings in fiscal 2006, the first full year of combined results. Excluding one-time costs and start-up expenses of 5 cents per share, the acquisition is expected to dilute profits by 3 cents per share in fiscal 2005.

Evercore Partners and JPMorgan Chase advised Avaya on the transaction. Tenovis/KKR was represented by CSFB and Morgan Stanley.