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EXFO Electro-Optical Engineering

EXFO buys Finnish technology group NetHawk Oyj for an initial €37.3m

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EXFO Inc (NASDAQ: EXFO, TSX: EXF) said it has acquired Finnish technology group NetHawk Oyj for €37.3m in cash. EXFO expects the deal to be earnings neutral for the remainder of fiscal 2010, and accretive in fiscal 2011. The transaction also includes an additional earn-out agreement, based on the company’s sales performance over the next three years, which could raise the total value of the deal by €8.7m.

"This acquisition represents a defining milestone in EXFO's near 25-year history, since it not only transforms us into a global force in wireless testing, but it also moves us among the top five suppliers in the telecom test and service assurance industry”, EXFO chairman, president and CEO Germain Lamonde said.

According to EXFO, NetHawk is the second-largest provider of 2G, 3G and 4G/LTE protocol analyzers and simulators for wireless network equipment manufacturers (NEMs) and network operators. Under the terms of the deal, EXFO will acquire 91% of NetHawk's outstanding shares, and will purchase the remaining shares through a statutory procedure under the Finnish Companies Act.

NetHawk posted revenue of €28.5m and EBITDA of €4.2m for the fiscal year ended December 31 2009. EXFO plans to retain NetHawk's management, R&D, sales and marketing teams of approximately 370 employees mainly located in Finland, India and the United States.

EXFO cited international consultancy Frost and Sullivan as forecasting the ‘Protocol Analyzer’ and ‘Network Monitoring Market’ for wireless networks will grow from US$595.2m in 2008 to US$814.2m by 2013. Similarly, the ‘LTE Test Equipment Market’ is expected to increase at a compound annual growth rate of 56% during this period.

NetHawk's total addressable market is currently estimated at US$610 million.

Quick facts: EXFO Electro-Optical Engineering

Price: $3.69

Market: NASDAQ
Market Cap: $204.4 m
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