DZS to divest Asia business to DASAN Networks for $48M

DZS has secured $25 million in debt and equity funding and signed a definitive agreement to divest its Asia business, creating a broadband networking and AI-driven software pure play focused on the Americas, Europe, Middle East, and Africa, and Australia/New Zealand regions. On Jan. 5, 2024, DZS signed a definitive agreement to sell its Asia operations to Korea-based DASAN Networks, a significant stockholder of DZS, for $48 million, consisting of $5 million of cash and the elimination of approximately $43 million of debt. The sale is expected to close in February 2024, subject to regulatory approvals and other customary closing conditions. In addition, DZS has secured $25 million of cash, consisting of a $15 million, 3-year term note with EdgeCo, in connection with EdgeCo also receiving 6.1 million of warrants at an exercise price of $1.84, and $10 million as part of a private placement of DZS common stock with a Korean limited partnership controlled by Invites Ventures Co., of which affiliates of DNI are the limited partners. The divestiture allows DZS to focus on the Americas, EMEA and ANZ regions that are strategically aligned with the technology and acquisition investments made over the past several years, specifically the company’s category-defining Velocity access edge optical line terminal portfolio; Saber optical edge reconfigurable optical add-drop multiplexer dense wavelength-division multiplexing platform resulting from its Optelian acquisition in 2021; and its advanced AI-driven orchestration, automation, slicing, network assurance and WiFi management software portfolio resulting from the company’s acquisitions of RIFT and ASSIA software and R&D assets in 2021 and 2022 respectively. This divestiture of its Asia Business aligns with the company’s vision, strategy and growth pillars unveiled in October of 2020, specifically Fiber-to-the-X broadband investment cycle fueled by over $100 billion in government stimulus funds, growth spanning North America and Europe, geopolitical security related cap-and-grow opportunities, software-defined networking, and 5G mobile transport adoption. Over the past two years and during the second half of 2023, DZS has secured several new marquee customers inclusive of multi-year FTTX networking and 5G cloud software contracts which the company anticipates will fuel valuable growth over the next several years. The $30 million of incremental working capital will strengthen DZS’ balance sheet, supporting a robust pipeline, numerous field trials and the timing of billions of government stimulus funds anticipated to begin deployment in 2024.