WESTERN MULTIPLEX FOILS STRATEX BID

Broadband wireless vendor stays course with Proxim merger

Broadband wireless vendor Western Multiplex has fended off DMC Stratex Networks' second attempt to acquire it, opting instead to go ahead with its merger with Proxim, a wireless enterprise equipment manufacturer. The decision not only left Stratex empty-palmed, but it also puzzled analysts who thought that the two companies would complement each other perfectly.

Earlier this month, Stratex, the broadband wireless vendor formerly known as Digital Microwave, offered to exchange 0.5215 shares of its own stock for all outstanding shares of Western Multiplex's stock. Stratex officials and analysts said the deal put Western Multiplex's shares at a much higher premium than the Proxim deal, even though Western Multiplex's shares are depressed.

But Western Multiplex officials rejected Stratex's offer, releasing a statement that Western Multiplex is committed to the “long-term strategic and economic rationale” of the Proxim merger.

A Western Multiplex spokeswoman said she could not reveal any more details of the deal until the boards of Proxim and Western Multiplex consider it at the end of the month.

Still shellshocked from the quick rejection, Stratex must decide whether to continue its yearlong courtship of Western Multiplex. A Stratex spokeswoman said the company is still evaluating Western Multiplex's response, and Stratex Chairman Chuck Kissner urged Western Multiplex's board to reconsider.

WOOING WESTERN MULTIPLEX

2001 Jan. 10, 2001 Adaptive Broadband and Western Multiplex terminate merger agreement

Summer 2001 DMC Stratex and Western Multiplex hold preliminary merger talks, which Western Multiplex eventually calls off

2002 Feb. 26, 2002 Western Multiplex and Proxim agree to merge; Stratex (led by Chairman Chuck Kissner) makes last-minute acquisition offer

March 5, 2002 Western Multiplex rejects Stratex's offer

“Ours is a highly compelling offer delivering substantial short- and long-term value to the stockholders of Western Multiplex,” Kissner said in a statement. “We are surprised that the board of directors of Western Multiplex did not recognize the merits of the offer.”

The continued overtures to Western Multiplex seem out of character, considering the conservative nature of Stratex. Even in the boom year of 2000, Stratex made only $15 million in strategic and financial investments.

But Western Multiplex is particularly attractive to Stratex because there is practically no overlap in the two vendors' businesses, despite the fact they both sell point-to-point broadband wireless equipment, the Stratex spokeswoman said. Stratex makes radios in the licensed frequencies and sells mainly to international carriers. Western Multiplex's radios operate over unlicensed frequencies, and most of its sales are domestic.

“A combination with Western Multiplex was just too positive for us to ignore,” the spokeswoman said.

It's not just Stratex that feels the Western Multiplex acquisition would be a good fit. Strategis Group analyst Peter Jarich said the two companies complement each other perfectly.

“With Proxim and Western Mux, the only thing they have in common is that they're wireless,” Jarich said. “They don't really do the same thing.”

“There must be some awfully compelling reasons we don't know about for [Western Multiplex] to continue with the Proxim merger,” he said.