Corvis vote OKs purchase of Dorsal

Deal's value has shrunk to about $50 million with fall in share price

May 11, 2002|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Shareholders of Corvis Corp., a Columbia maker of fiber-optic equipment, have overwhelmingly approved a deal to buy Dorsal Networks, which also is based in Columbia.

At its annual meeting yesterday at the BWI Marriott in Linthicum, Corvis said 81 percent of about 187 million shares voted were in favor of the deal.

Dorsal, which makes undersea optical networks, has no customers and had a $31.75 million net loss last year, according to documents filed with the U.S. Securities and Exchange Commission.

Corvis' chairman, president and chief executive officer, David Huber, is also chairman of Dorsal and directly and indirectly owns 31 percent of the outstanding stock in the latter company, according to SEC documents.

Huber was not involved in the decision to acquire Dorsal but agreed to vote his stock in favor of it, the company said.

"You're buying a company which has no earnings; we do not know how soon there will be earnings," Walter Lamm, a shareholder from Baltimore County, said at the meeting.

Corvis announced in January that it would buy Dorsal for stock then valued at about $90 million. The value of the deal has since declined as Corvis' stock has slid.

Corvis' shares closed yesterday at $1.22, down 3 cents. Based on that closing price, the Dorsal deal is valued at about $50 million.

The acquisition is expected to close on May 15.

Shareholders, one of whom said he considered the acquisition a good move, asked Corvis executives whether the company has enough cash to pursue the undersea market and if they expected shares, which are being diluted by the acquisition, to appreciate in value.

Executives said the company has a strong cash position. Corvis had $612 million in cash, cash equivalents and short-term investments at the end of last year, said the company's chief financial officer, Lynn Anderson.

The Dorsal acquisition is expected to nearly double the market to which Corvis can sell, Huber said. Dorsal's technology is less expensive than other undersea equipment for carriers to buy and operate, he said.

"We believe this merger is the right strategic fit for our business and the right decision to provide value for our shareholders," Huber said.

Once the merger is complete, Dorsal President and Chief Executive Officer James Bannantine is to become Corvis' president and take over the company's day-to-day operations.

Huber told shareholders yesterday that, although Corvis has suffered from the woes of the telecommunications sector, he thinks its long-term prospects are good.

"I assure you that we are going to work hard to make 2002 successful," Huber said.

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