Struggling tape and disk storage vendor Overland Storage is buying recovering tape systems vendor Tandberg Storage for $42m in stock to help boost its revenues.
Tandberg Data supplies tape and disk-based storage and data protection products to small and medium businesses. It has recently recovered from a bankruptcy experience in 2009, under the stewardship of Pat Clarke’s executive team, and has just about become profitable again.
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Overland Storage has had a similarly difficult time of late, and has product overlap with its slurpee – although it also supplies scale-out filer and block-access storage arrays for on-premise and cloud storage for all types of data. It too has been trying to recover from a declining tape market, once the mainstay of its business, for many years – during which it has made continuous losses and its exec team has acted as financial Houdinis, escaping from one perilous financial situation after another.
Cyrus Capital, Tandberg’s owner and a major Overland investor, has been pushing for a merger or acquisition between the two for some months.
Eric Kelly, Overland’s president and CEO, said:
The Overland and Tandberg combination will accelerate our strategy of becoming a global leader in the data management and data protection industry. With more than $100 million in annual revenue for the combined company during the last fiscal year, we expect the combination of these two businesses to provide us with a clearer path to profitability. The combined company will offer one of the broadest product lines and service offerings in the enterprise storage marketplace, and have the resources necessary to expand our market presence, fuel our growth and deliver innovative products and cloud offerings in the future.
The combination of Overland and Tandberg will expand our geographical reach in Europe , Asia and the Middle East, as well as strengthen the research and development team. It will also enable us to leverage the world-class manufacturing facility in China.
Tandberg Data CEO Pat Clarke said: “We look forward to joining forces with Overland and are excited to combine our substantial resources to create a stable platform for profitability, enabling greater focus on accelerating revenue growth. Together we will be able to support our customers globally with over 16,000 channel and service partners."
- It is a 100 per cent stock transaction.
- Cyrus Capital, the owner of Tandberg Data, and other convertible debt-holders will convert approximately 81 per cent of their currently outstanding convertible debt into shares of Overland common stock at a price of $1.30 per share.
- Eric Kelly will continue to serve as president and CEO of the combined company. Kurt Kalbfleisch will continue to serve as CFO and Randy Gast of Overland will serve in newly created position of COO.
- Overland's board of directors will be expanded to seven directors, of which five will be current board members. The other two will be new board members appointed by Cyrus Capital.
Tandberg is the larger company in terms of product revenues. There will be Tandberg executive representation in the combined company, on the sales side for example, but Clarke himself will gradually exit. He said the two companies, by combining, would have more firepower and scale, and virtually no debt. Together the new organisation has a much better set of possibilities for growing, perhaps with an acquisition or two in the future.
Clarke said it will be all down to execution, noting, “The plan looks good.”
The acquisition is expected to complete by the end of the year. Read the PDF of the relevant SEC 8-K filing here. ®