ADC buys cabling vendor Krone

Broadband equipment vendor ADC announced today it will acquire cabling vendor Krone Group from its parent, GenTek, for approximately $350 million--$291 million in cash and the rest in assumed liabilities, the bulk of which consists of pension obligations to Krone’s German workforce.

Acquiring Krone, which sells a variety of fiber and copper cabling products to both enterprises and service providers, should give ADC greater inroads to international markets and enterprise customers as well as cross-selling opportunities, said ADC CEO and president Robert Switz.

"This gives us the full range of participation in the enterprise market that we didn’t have prior to this acquisition," Switz said. "Going back several years ADC did have some very nice products that were focused on this market, but we really didn’t have adequate channels to take advantage of them."

Switz doesn’t anticipate divesting any products after the acquisition because there is virtually no product overlap between the two companies. In Europe, Krone sells an equivalent to ADC’s DSX line of copper connectivity products, but Krone’s gear supports European standards and ADC’s DSX does not. However, in the future, ADC will not "emphasize" its software or cable modem businesses, Switz said.

The two vendors also compliment each other geographically. While about 70% of ADC’s revenue comes from North America, 80% of Krone’s revenue comes from outside North America—about 60% from Europe, the Middle East and Africa and 20% from Asia.

Krone saw sales totaling $316 million in 2003, while ADC’s net sales were more than $773 million. Switz said the headcount of each company was "approximately the same size."

ADC has retained consulting firm Booz Allen Hamilton to assist the integration of the two companies. Pending regulatory approval, both companies expect the acquisition to close by the end of July.