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Enterasys goes private in $386m buy-out

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Enterasys Networks, the firm formed from the enterprise division of networking pioneer Cabletron five years ago, has been bought by a private investment group for $386m.

A consortium of firms, led by The Gores Group and Tennenbaum Capital Partners, have offered $13.92 in cash per share, a 32 per cent premium over the closing price on the New York Stock Exchange on 11 November. The transaction is subject to shareholder approval and expected to complete in Q1 2006.

The deal draws a line under a difficult period for Enterasys as a stand-alone company during which it has recorded only one profitable quarter and weathered a financial scandal that saw its former chief exec convicted with fraud and the arrival of a new management team. Financing difficulties faced by Enterasys prompted the new management team to accept a buy-out that will the firm de-listed from the stock exchange.

Mark Aslett, president and chief executive officer of Enterasys, said: "We believe operating as a private company with the backing of Gores and Tennenbaum will enable us to capture market opportunities not available to Enterasys today. The company's current senior management team will continue to lead Enterasys, with corporate headquarters remaining in Andover, Massachusetts," he added.

Michael Tennenbaum, senior managing partner of Tennenbaum, said the transaction "provides operational support and financial resources that will enable Enterasys to be a more formidable competitor in the global market for enterprise networking solutions".

The Enterasys portfolio includes multilayer switches, core routers, WAN routers, wireless LANs, network management, and intrusion protection systems. It was created 2000 after parent firm Cabletron was split into four as a strategy to create more dynamic and focused companies from the body of a networking pioneer that (like so many others) got its butt kicked by Cisco.

Cabletron, long considered the Rolls-Royce of networking, with clients like NATO, the BBC and err... Rolls-Royce, weathered a decline in fortunes during much of the late nineties even while its competitors were enjoying boom times. It relied too heavily on hubs for its revenues while the market migrated to LAN switches, and as arch-enemy Cisco Systems tried to pitch its kit against circuit-switched technology - which telcos know and trust.

Cabletron was co-founded by former New Hampshire Governor Craig Benson before he went into politics. Benson was known for his aggressive management approach and flamboyant style he shared with fellow founder Bob Levine. Levine bought a tank and memorably managed to lose a tooth after crashing into a tree during a jaunt he took with it through the New Hampshire woods. ®

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