The Galway-based software company, Saville Systems, is to be acquired by ADC Telecommunications in a share-exchange deal worth $700 million (€677 million). On Thursday, Saville will announce that it is expanding its Irish operation, with a new building and some extra staff.
The transaction has been approved by the boards of both companies and will see each Saville share exchanged for 0.358 of an ADC share. The deal is expected to close during ADC's fourth financial quarter, which ends on October 31st. ADC said it expected the purchase to have no effect on its earnings per share in the first 12 months, and should add to earnings after that.
Although based in the Republic, Saville does most of its business from its offices in Burlington, Massachusetts. The company develops and sells billing and customer care software products for the telecommunications industry; it has some 1,400 employees worldwide, including 200 in Galway.
ADC, with annual sales of $1.5 billion, is a global supplier of voice, video and data systems for communications networks. It has a staff of 9,600.
IDA Ireland said it was delighted with the takeover because it saw ADC as an expanding, forward-looking firm and had been trying in recent years to attract it to the Republic.
"We've been knocking on their door for some time. By coincidence, the Tanaiste and the chief executive of the IDA, Mr Sean Dorgan, have meetings arranged with senior ADC executives later this week," a spokesman said.
The chairman and chief executive of Saville, Mr Jack Boyle, said the acquisition brought together two companies with a shared vision of designing comprehensive, integrated software solutions.
"As a result of market deregulation and competition for customers, the world's incumbent and new competitive communications service providers are seeking innovative approaches to address network applications such as billing, customer care, provisioning and network management," Mr Boyle said.
He said ADC would benefit Saville with a broad knowledge of network architectures and operating processes that would add tremendous value to the Galway-based firm's software products.
ADC chairman and chief executive, Mr William Cadogan, said the purchase represented a significant step for the firm, and would expand its development of communication software applications.
"The battle among communications service providers is increasingly centred on services rather than technology, and these services can only be managed effectively through software," Mr Cadogan added. "Saville's leading-edge billing and customer care software products and highly-skilled people will add a strategically important dimension to our growing software portfolio."
He said the move would provide ADC with another tool to help position its customers, and allow both companies to sell "more deeply and broadly" into a combined customer base.
In April, shares in Saville Systems plunged repeatedly on the Nasdaq, spurred by a profits warning. Later in the month the company announced a net loss of $3.2 million (€3.1 million), compared to net income of $9.2 million in the first three months of 1998.
"We are obviously disappointed that we closed significantly less business than anticipated this quarter," Mr Boyle said at that time. "Although our visibility remains limited by continuing uncertainty associated with current market conditions, we do expect revenue and earnings growth for the year."
In January, however, Saville announced record results, with revenues for 1998 up 57 per cent at $167.7 million. Net profits rose 13 per cent to $27.1 million; excluding a once-off charge, the net profits figure was $36.5 million, or 90 cents per share.
Under yesterday's deal, Mr Boyle will remain as chairman of Saville, and also become one of the senior vice-presidents of ADC.
