3Com buying U.S. Robotics for $6.6 billion
Feb. 26, 1997
CHICAGO (AP) _ 3Com Corp., a maker of computer networking products, is buying modem maker U.S. Robotics for $6.6 billion as the two seek to become a leader in the business of connecting computers.
The deal, announced Wednesday, will create a high-tech company with $5 billion in annual revenue and more than 12,000 employees.
``The combination of 3Com and U.S. Robotics dramatically alters the networking landscape,'' said Eric Benhamou, 3Com's chairman and chief executive, said in a statement.
Computer networking involves linking groups of machines, often within a single company, to allow employees to work together even if they are several hundred miles apart. It is one of the fastest-growing areas in the computer business today.
3Com will acquire U.S. Robotics for its own stock, giving Robotics shareholders 1.75 shares of 3Com for each share they hold. The works out to $6.6 billion as of the market's close, or $68.25 a share.
The combined company will retain the 3Com name and Benhamou will remain chairman and CEO.
3Com and U.S. Robotics together will be able to provide customers with the hardware necessary to create networks, including interface cards that allow computers to understand each other, and high-speed modems.
Casey Cowell, chairman and chief executive of U.S. Robotics, said the combination will allow the new company to sell its products to a variety of customers including big and small corporations, telephone carriers, network and Internet service providers, and consumers.
The news was announced after markets closed Wednesday. 3Com shares closed at $39, down 12 1/2 cents on the Nasdaq Stock Market. U.S. Robotics was off 50 cents at $61 in Nasdaq trading.
3Com shares have fallen by almost 50 percent in the past month amid concerns about general weakness in the networking sector that have also weighed on U.S. Robotics' stock.
Cowell will become vice chairman of 3Com after the deal is completed, which is expected this summer. The companies said there would be an unspecified charge against earnings to account for the deal in the quarter in which it is completed.