Tellabs and AFC Amend Merger Terms

Sep 07, 2004, 01:00 ET from Tellabs from ,AFC

    NAPERVILLE, Ill. and PETALUMA, Calif., Sept. 7 /PRNewswire-FirstCall/ --
 Tellabs (Nasdaq:   TLAB), a leader in bandwidth management and optical
 transport, and AFC (Nasdaq:   AFCI), a leader in access, have amended the terms
 of the companies' merger agreement announced on May 20, 2004.
     Under the terms of the amended agreement, which was approved today by both
 companies' boards of directors, AFC stockholders will receive 0.504 shares of
 Tellabs common stock and $12.00 in cash for each AFC share. The original
 exchange ratio was 1.55 Tellabs shares and $7.00 in cash for each AFC share.
 Based on today's closing price for Tellabs' stock, the revised exchange ratio
 represents $16.60 in value per AFC share, or a total value of approximately
 $1.5 billion.
     As previously announced, following AFC's release of its second-quarter
 results and outlook, the Tellabs board of directors requested that Tellabs'
 management conduct a further review and analysis of AFC's business and
 financial outlook.  In light of that review, the market reaction to AFC's
 release, and the prospects for completing the merger on the previously
 announced terms, and in order to increase the likelihood that the merger would
 be consummated on terms fair to the stockholders of both companies, the two
 companies agreed to amend their merger agreement.
     Upon completion of the transaction, Tellabs' stockholders will own
 approximately 90% of the company and AFC stockholders will own 10%. Including
 synergies, Tellabs expects the transaction to be accretive to full-year 2005
 pretax income on a per-share basis, excluding amortization associated with
 acquired intangibles and other purchase accounting adjustments.
     "The strategic rationale for combining Tellabs and AFC on the revised
 terms remains compelling," said Krish Prabhu, president and chief executive
 officer of Tellabs. "We look forward to serving our customers better with the
 combined strengths of both companies."
     "Both companies agreed that it was in our mutual interest to revise the
 deal terms," said John Schofield, chairman, president and CEO of AFC. "Our
 stockholders will receive a larger proportion of the merger consideration in
 cash, while still participating in the anticipated strategic benefits of the
 merger.  We believe this merger is the right decision for AFC's shareholders."
     Upon completion of the transaction, John Schofield will become vice
 chairman of the Tellabs board of directors, which will be expanded to 10
     The transaction is subject to certain closing conditions, including
 clearance by the U.S. Securities & Exchange Commission (SEC) of the
 proxy/prospectus relating to the transaction and approval by AFC stockholders.
 Approval by Tellabs' stockholders is not required under the new terms.
 Because the revised mix of stock and cash currently does not meet requirements
 for a tax-free transaction, the merger is expected to be structured as a
 taxable transaction.  The companies previously announced that the Federal
 Trade Commission had granted early termination of the waiting period under the
 Hart-Scott-Rodino Antitrust Improvements Act for the merger.  Subject to
 satisfaction of closing conditions, the companies currently expect the merger
 to close before year-end 2004.
     Simultaneous Webcast and Teleconference Replay -- Tellabs and AFC will
 host an investor teleconference at 7:30 a.m. Central time on Wednesday, Sept.
 8, to discuss the amended merger. To access the teleconference, dial 706-679-
 3667.  Internet users can hear a simultaneous webcast of the teleconference at ; click on the webcast icon. A taped replay of the call
 will be available beginning at approximately 9 a.m. Central time on Wednesday,
 Sept. 8, until 9 a.m. Central time on Friday, Sept. 10, at 800-633-8284.
 (Outside the United States, call 402-977-9140.) When prompted, enter the
 Tellabs-AFC reservation number: 21207530.
     About Tellabs -- Headquartered in Naperville, Ill., Tellabs delivers
 technology that transforms the way the world communicates(TM). Tellabs experts
 design, develop, deploy and support our solutions for telecom service
 providers in more than 100 countries. More than two-thirds of telephone calls
 and Internet sessions in several countries, including the United States, flow
 through Tellabs equipment. Our product portfolio provides solutions in next-
 generation optical networking, managed access, carrier-class data, voice
 quality enhancement and cable telephony. For details, see .
     About AFC -- Headquartered in Petaluma, Calif., AFC is a leading provider
 of broadband access solutions for the global telecommunications industry. With
 a customer base of more than 800 service providers worldwide, AFC continues to
 build and support the world's evolving broadband access network architecture.
 For more information, please visit AFC online at or call
     Forward-Looking Statements -- Additional Information and Where to Find It
     This communication is not a solicitation of a proxy from any security
 holder of Tellabs, Inc. or Advanced Fibre Communications, Inc.  Tellabs, Inc.
 plans to file with the Securities and Exchange Commission an amendment to its
 Registration  Statement  on  SEC  Form  S-4, and Advanced Fibre
 Communications, Inc. expects to mail a Proxy Statement/Prospectus to its
 stockholders concerning the proposed merger of Advanced Fibre Communications,
 Inc. with a subsidiary of Tellabs, Inc. WE URGE INVESTORS AND SECURITY HOLDERS
 Investors and security holders will be able to obtain the documents free of
 charge at the SEC's website, .  In addition, documents
 filed with the SEC by Tellabs, Inc. will be available free of charge from
 Tellabs Investor Relations, 1415 West Diehl Road, Naperville, IL 60563, 630-
 798-8800.  Documents filed with the SEC by Advanced Fibre Communications, Inc.
 will be available free of charge from Advanced Fibre Communications Investor
 Relations, 1465 North McDowell Blvd., Petaluma, CA, USA 94954, 707-792-3500.
     Interest of Certain Persons in the Merger.
     Advanced Fibre Communications, Inc., and its directors and executive
 officers and other members of its management and employees, may be deemed to
 be participants in the solicitation of proxies from the stockholders of
 Advanced Fibre Communications, Inc. in connection with the merger.  The
 directors and executive officers of Advanced Fibre Communications, Inc. have
 interests in the merger, some of which may differ from, or may be in addition
 to, those of the respective stockholders of Advanced Fibre Communications,
 Inc. generally.  Those interests   will be described   in   greater detail in
 the Proxy Statement/Prospectus with respect to the merger, which may include
 potential membership on the Tellabs, Inc. Board of Directors, option and stock
 holdings and indemnification.  Information about the directors and executive
 officers of Advanced Fibre Communications, Inc. and their ownership of
 Advanced Fibre Communications, Inc. stock is set forth in the proxy statement
 for Advanced Fibre Communications, Inc.'s 2004 annual meeting of stockholders.
 Investors may obtain additional information regarding the interests of the
 participants by reading the proxy statement/prospectus when it becomes
     Statements in this press release regarding the proposed merger of Tellabs,
 Inc. and Advanced Fibre Communications, Inc. which are not historical facts,
 including expectations of financial results for the combined companies (e.g.,
 projections regarding revenue, earnings, cash flow and cost savings), are
 "forward-looking statements."  Forward-looking statements are not guarantees
 of future performance and involve risks, uncertainties and other factors that
 may cause either company's actual performance or achievements to be materially
 different from any future results, performance or achievements expressed or
 implied by those statements. Either company's actual future results could
 differ materially from those predicted in such forward-looking statements.
 Investors and security holders are cautioned not to place undue reliance on
 these forward-looking statement and any such forward-looking statements are
 qualified in their entirety by reference to the following cautionary
     Important factors upon which the forward-looking statements presented in
 this release are premised include:  (a) receipt of regulatory and stockholder
 approvals without unexpected delays or conditions; (b) timely implementations
 and execution of merger integration plans; (c) retention of customers and
 critical employees; (d) economic changes impacting the telecommunications
 industry; (e) successfully leveraging Tellabs/Advanced Fibre Communications'
 comprehensive product offering to the combined customer base; (f) the
 financial condition of telecommunication service providers and equipment
 vendors, including any impact of bankruptcies; (g) the impact of customer and
 vendor consolidation; (h) successfully introducing new technologies and
 products ahead of competitors; (i) successful management of any impact from
 slowing economic conditions or customer demand; and (j) protection and access
 to intellectual property, patents and technology.  In addition, the ability of
 Tellabs/Advanced Fibre Communications to achieve the expected revenues,
 accretion and synergy savings also will be affected by the effects of
 competition (in particular the response to the proposed transaction in the
 marketplace), the effects of general economic and other factors beyond the
 control of Tellabs/Advanced Fibre Communications, and other risks and
 uncertainties described from time to time in Tellabs/Advanced Fibre
 Communications' public filings with the Securities and Exchange Commission.
 Tellabs and Advanced Fibre Communications disclaim any intention or obligation
 to update or revise any forward-looking statements.
     AFC, Inc., AFC and the AFC logo are registered trademarks of AFC, Inc. The
 Acronym for Access is a service mark of AFC, Inc.
     Tellabs(R), Tellabs logo(R) and technology that transforms the way the
 world communicates are trademarks or registered trademarks of Tellabs or one
 of its affiliates in the United States and/or other countries. Any other
 trademarks are the property of their respective owners.