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Quantum completes ADIC purchase

Quantum has announced the completion of its acquisition of Advanced Digital Information Corporation, creating what it says is now 'the leading global storage company specialising in backup, recovery and archive solutions'.

Quantum has announced the completion of its acquisition of Advanced Digital Information Corporation, creating what it says is now ‘the leading global storage company specialising in backup, recovery and archive solutions’.

With the close of the acquisition, Quantum says it will provide customers of all sizes with a comprehensive range of innovative products and services designed to meet their current and future data protection and retention needs. The combination is also expected to expand Quantum’s market access, increase its opportunities for growth and strengthen its financial position.

“We are bringing together two long-standing leaders in backup, recovery and archive to create the largest independent company in this market, with more than 50 years of experience in meeting customer needs,” said Rick Belluzzo, chairman and CEO of Quantum. “By combining our complementary strengths and intelligently integrating our broad range of assets, we are well positioned to provide even greater value to customers, expand our branded channel and OEM base and pursue new opportunities for growth. We will have more to say about this over the next 30-45 days as we begin integrating the two companies.”

With the acquisition of ADIC, Quantum now offers a comprehensive portfolio of platform-independent systems, software, devices and media that reflect a deep commitment to customer-driven innovation. For example, both companies have been pioneers in developing disk-based virtual tape libraries for open systems environments and building remote monitoring and intelligent diagnostic capabilities in tape automation systems. In addition, with combined revenues exceeding $1.2 billion over the last four quarters and a significantly larger sales and service infrastructure, Quantum now has the scale to engage with customers at a more strategic level.

In preparation for the completion of the acquisition, Quantum and ADIC teams have been working to ensure that the newly combined company continues to meet the needs of existing customers and partners on both sides during the integration of the two companies. As a result, Quantum has announced that it will continue to: sell and support all current Quantum and ADIC products; sell all products through the companies’ respective partners and distribution channels; and maintain existing service contracts and product warranties. Quantum has also moved quickly to finalise its Sales, Marketing and Service organisation, and all customer-facing positions, roles and responsibilities will be finalised by next week. With the completion of the acquisition, Quantum will have nearly a thousand Sales, Marketing and Service employees providing advice and support to customers around the world.

The financial data goes like this. Under the terms of the definitive agreement announced on May 2, 2006, and following approval of the transaction by ADIC shareholders last Friday, Quantum acquired all of ADIC and its outstanding shares for approximately $770 million, primarily in cash. Quantum is funding the transaction through a combination of cash on hand and approximately $500 million in financing from a group of banks and other lending institutions. The annual interest expense resulting from the financing is expected to be approximately $50 million.

Quantum expects the transaction to be up to 15 cents accretive on an earnings per share basis, with the accretion beginning to appear in its financial results in the March quarter of next year. As a result of intensive integration planning over the last few months, the company has identified annualised cost synergies of approximately $75 million to $80 million, compared to the $45 million it had initially estimated when it announced the definitive agreement. Quantum expects to begin realising the benefit of a significant portion of these synergies by the end of this calendar year, the majority of the synergy savings by the end of its fiscal year (March 31, 2007), and the remaining synergy benefits in the following two quarters after that. According to the company, the synergies will reduce both cost of goods sold and operating expenses and primarily be generated by eliminating redundancies in internal programs, processes and employee positions, rationalising facilities, leveraging higher manufacturing volumes to reduce supply chain costs, and streamlining procurement processes.