The
following materials were used by Andrew’s management to
answer employee questions following the public announcement of the
entry into a merger agreement by Andrew
Corporation and ADC Telecommunications, Inc.
May 31, 2006
For Messaging Purposes Only: Not for Distribution
— For Internal Use Only —
ANDREW-SPECIFIC QUESTIONS FOR MERGER ANNOUNCEMENT
1. Why are ADC and Andrew merging?
This proposed merger provides us an unprecedented opportunity to grow our company in a truly
transformational way. Together, we are forming a clear world leader in communications network
infrastructure products and services. Together, our two companies will be able to drive
significantly more value for our customers, shareowners and employees than we could do on our own.
2. Do the two companies match up well with their core values?
We believe ADC and Andrew are extremely well matched. For example, The ADC Way, ADC’s fundamental
values statement, includes key words like customer, quality, innovation, teamwork, and integrity.
These values are viewed as critical success factors throughout Andrew’s management team as well,
making the combination a good cultural match for both companies.
Like ADC, Andrew’s reputation for ethical, moral and legal business conduct is one of its most
valuable assets. We built our reputation similar to ADC’s — by conducting business with honesty
and integrity.
Both companies have been in business for over 70 years. Over that time the companies have grown to
become world leaders in their respective market segments: ADC in wireline connectivity and Andrew
in wireless solutions. Combining the two companies creates a portfolio of products, systems and
services unmatched by any other company in the world.
Over these 70 years the cultures at Andrew and ADC developed in a similar fashion. Employees at
both companies take great pride in their work, their company, and themselves. Both companies have
a foundation of open communications and high ethical standards.
3. What’s the dollar value of the merger?
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The proposed merger has a combined revenue over the last twelve months of $3.3 billion (1).
(1) For the most recent reported 12 months as of May 31, 2006, combined sales for the two
companies on a pro forma basis.
4. How is the deal structured?
The strategic business combination is structured as a stock-for-stock merger with Andrew becoming a
wholly owned subsidiary of ADC. The transaction is expected to qualify as a tax-free
reorganization. Under the terms of the agreement, Andrew shareowners will receive 0.57 of an ADC
common share for each common share of Andrew they hold. ADC will assume all debt of Andrew and
Andrew’s convertible notes will become convertible into ADC shares.
Post-closing, the transaction is expected to be non-dilutive to earnings per share in the first
year of the combined company and accretive thereafter, excluding purchase accounting adjustments
and other acquisition-related expenses. Post closing, the faster the combined company is able to
execute our integration plans the faster our financial results will be favorable.
5. What will be the impact on FY2006 results?
In terms of impact on FY2006 financial results, the merger is scheduled to close near the end of
the Andrew fiscal year. The finances of the two companies are combined only after closing.
Regardless of when the deal closes, there will not be a significant impact on our financial
results. The only FY2006 impact will be from additional expenses incurred from the merger costs and
integration team activities, or if we allow ourselves to be distracted from achieving our planned
results.
6. When do you expect the deal to close?
The transaction is expected to close in approximately four to six months, subject to the
customary regulatory and governmental reviews. Also, shareholder approval from both companies
will need to occur.
7. Did Andrew consider merging with other companies?
In the normal course of planning and implementing our long-term strategies, we have evaluated
numerous potential combinations that make the most sense for Andrew and its employees and
shareholders. For quite some time both ADC and Andrew had considered each other to be an ideal
partner. Recently, the management and boards of directors of both companies believed that the
strategic combination of merging ADC and Andrew was the correct way for both companies to move
forward at this time.
8. Can another company or companies make competing bids for Andrew?
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It is possible, but we believe this merger with ADC is the best for our company.
9. Will the organizational structure and executive management of the new company change from ADC and Andrew? How will the Business Units, Regional Staffs and Headquarter staff be integrated in the new company?
With this proposed merger announcement, several high level organizational details have been
defined, while the majority will be worked out during the integration process. While it’s early, we
do want to share decisions that have been made regarding the proposed organizational structure.
The proposed organizational structure of the combined companies will have four global business
groups: Wireless Technology and Systems, led by Mickey Miller of Andrew. Antenna, Cable &
Satellite, led by John DeSana of Andrew. Global Services & Solutions, led by Dick Parren of ADC. Network Connectivity Solutions, led by Pat O’Brien of ADC.
All existing Andrew product functions will be rolled into one of these four global business
groups. BSSG, WIG, and Network Solutions will be part of Wireless Technology and Systems, while
Antenna and Cable Products and Satellite Communications will be part of Antenna, Cable &
Satellite. Each global business group also will have responsibility for the manufacturing
locations that serves the group.
The combined companies’ worldwide sales, marketing and customer service unit will be headed by
Roger Manka of Andrew.
The corporate functions will be structured as follows:
Finance — led by Gokul Hemmady of ADC as the Chief Financial Officer.
Legal — led by Jeff Pflaum as the General Counsel.
Corporate Services — Mary Quay of ADC will have responsibility for several key global company
processes, including information technology, facilities, and real estate.
Business Development — Hilton Nicholson of ADC will lead future business development efforts at
the company level. He will also continue to serve as President of ADC’s Wireline Business Unit,
which will be structurally placed in the Network Connectivity Solutions Group.
Strategy and Technology — Mike Day of ADC will lead company-level strategy and technology
planning.
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Human Resources — Bob Grams of ADC is promoted to Vice President, Compensation and Benefits,
and will serve as the interim company HR leader while Laura Owen is focused on her role as the
Chief Integration Officer.
There will be a Global Strategic Supply Chain and Logistics Team to ensure we have optimal
processes and cost profiles. This leader of this group will be named later.
Other specific changes beyond this are yet to be worked out.
10. Where will the headquarters be located for the combined company?
The global corporate headquarters will be located in Eden Prairie, Minnesota. The global business
groups will be based in the following locations:
•
Wireless Technical Systems: Richardson, Texas
•
Antenna, Cable & Satellite: Westchester, Illinois
•
Global Services & Solutions: Eden Prairie, Minnesota
11. Will there be facility, functional and employee consolidations?
ADC and Andrew plan to assess how we might bring significant synergies and create financial scale
for our customers and shareholders. In order to improve efficiencies, consolidation of redundant
functions, activities and facilities will occur. We also intend to leverage research and
development across a broader platform. In addition, it’s anticipated that we will realize reduced
administrative expenses through the integration process of the merger. Optimizing supply chain,
sourcing and procurement opportunities for combined purchasing volumes also presents an opportunity
for increased synergies.
That being said, there are significant opportunities for growth due to the proposed merger.
There is huge potential to create a truly global footprint with a world-class customer base and
we plan on leveraging our combined strength to become the leading global network infrastructure
supplier. With an increase in global presence, product breadth and innovation, opportunities
increase for employees because employees hold critical product/solution and customer knowledge.
12. Will employees be provided severance in the event of job reductions?
Yes. Severance will be offered in the event of job reductions, but will have to be
coordinated according to local government requirements.
13. What
can employees do between today and the day of close of the proposed merger?
During this time, it’s important that we all remain vigilant in our support of our
customers and meet our customer demands. We still have a business to run and it’s
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extremely important that we maintain focus on the business during the next few months.
Don’t allow yourself to get distracted.
Some employees will be assigned integration activities and we need you to support their movement
to these activities and provide additional back up assistance on their previous assignments.
Teamwork will be essential. Stay focused on the business so we can successfully execute on our
third and fourth quarter goals. We must achieve our targets!
14. What can’t employees do between today and the day of close of the proposed merger? Can ADC and Andrew employees contact each other or our customers for information between today and day of close? Can we share information between today and close of the proposed merger?
The law requires that we continue to operate our business in the ordinary course. This means we
must operate separate of ADC and remain a competitor of ADC until the transaction closes. Under
NO circumstances should you contact ADC employees unless you are requested to engage in
integration planning. If you are asked to engage in integration planning you should not have any
contact with ADC employees until clarification on appropriate activities is provided by Andrew’s
legal department to you. In the case of mutual customers, you should continue to pursue your
normal routine and course of discussions. Should the topic of the merger arise, you should only
discuss information that is in the Merger Press Release or Merger Overview Presentation. You
should not discuss any business dealings that this customer has with ADC.
15. What happens at closure and how will the two companies transition to a merged entity?
At this early stage we are still working through many of these transition details. Between the
merger agreement signing and closure, management of both companies will be working to plan how
they will work together after closure. Integration teams, with representatives from both
companies, will be appointed to ensure the integration is managed as smoothly as possible and that
issues and concerns are resolved promptly.
16. What happens if this merger fails to proceed to closure for legal, regulatory or other reasons?
Both Andrew’s and ADC’s Boards of Directors and its executive teams strongly believe that this
transaction will strategically position both companies for increased success in the future. We also
do not expect that there will be any barriers to closure that cannot be overcome. Having said that,
in the event that this proposed transaction does not proceed to closure, Andrew remains a strong
company with a growth and product strategy that will ensure our continued success. In either case,
we all need to stay focused and vigilant in our support of our customers and we need to meet our
commitments to our business.
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17. How are customers being notified of the change in ownership?
The ADC and Andrew sales teams are calling and emailing their respective customers to inform them
of the agreement to merge. We will work together to create detailed communications explaining our
plans to customers, partners and vendors that will be presented once the merger is closed. When
you are executing a merger, there are very specific laws concerning the types of information the
two merging companies can share with each other. The law demands that we continue to operate as
separate companies in the ordinary course of our respective businesses until we close. As such,
you should not have contact with your counterparts at Andrew or discuss anything concerning
customers
with anyone from Andrew. Should you have any questions concerning customer discussions, please
refer them to a sales VP who is in contact with our legal department regarding “do’s and don’ts”
of pre-merger competitive conduct.
18. Is there much overlap in the two companies’ lists of customers?
The overlap is surprisingly small. Andrew and ADC do have several mutual customers; however we
typically sell our products to different parts of the same organization. The most notable overlap
is with Wireless Operators such as Cingular, Sprint/Nextel, Verizon Wireless, Orange, O2, etc. But
given our portfolios are different we seldom compete head to head. We believe the fact that we have
differing customer lists presents a tremendous opportunity to cross-sell our products and solutions
into each other’s customer base.
19. How do our products overlap with ADC products?
The overlap with ADC products is very small. Both our companies have products for the wireless
coverage and capacity market. It is envisioned that an integration team staffed from both
companies will look at the best way to merge and rationalize our product offerings to bring the
absolutely best solutions to market.
20. Will layoffs take place?
Yes, the merger will result in some jobs being eliminated where there are redundancies between the
companies. For example, there will be some redundancies in headquarters operations. We anticipate
that it will affect a small percentage of our overall workforce.
21. When will we know who will be affected?
It is uncertain, but it won’t be until after the merger agreement is closed.
22. Will facilities be reduced?
It is possible that some facilities may be eliminated if there is overlap between two
companies. However, it is much too soon to know which, if any, will be affected.
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23. What are the anticipated benefits, such as cost savings or profitability improvements, and how will they materialize?
An estimated annual pre-tax earnings synergies of $70 million to $80 million (related EPS
$0.25-$.30) is expected in the third year. It is expected that the majority of these savings
will be realized in the combined companies’ cost of goods sold by leveraging procurement
economies of scale, rationalizing redundant facilities, and utilizing global logistics and
systems. We will create a merger integration team, which will review various synergistic
opportunities. After further discussion and analysis, various teams will decide what cost
savings will be available as well as a game plan to achieve these cost savings.
24. Who will serve on integration teams?
Various functions and employees from both companies will be chosen to serve. Those details will
be worked out soon.
25. How will reporting structures change?
For today, nothing changes. Reporting relationships and organizational structures remain the same.
Upon merger close, the two companies will consolidate their various product groups into four
global product centers. In addition, the various corporate and support functions also will be
combined into single organizations supporting this new worldwide company. Details will be
forthcoming.
26. How will employee work processes change?
Until the transaction closes, both companies will both continue to operate independently in the
ordinary course of business. Once closed, merger integration teams involving both ADC and Andrew
employees will be formed and asked to review various processes to optimize synergistic
opportunities.
27. Why was Andrew the acquired, not the acquirer?
ADC is acquiring Andrew due to ADC’s higher market capitalization (the total value of a firm’s
equity available on the market, determined by number of common shares multiplied by the current
price of those shares). ADC’s shared are higher valued by the market compared to Andrew’s, in
part, because of its performance with gross margins, return on sales, and earnings per share.
28. Is this a merger of equals?
Technically, ADC is acquiring Andrew. But in spirit of teamwork the two companies are combining
their strengths into a single powerful global company.
29. If the deal doesn’t close as planned, are there penalties involved?
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Yes, there are specific procedures that address this in the deal agreement.
30. What will the combined company be named? Will ADC’s and Andrew’s major products retain their names?
ADC Andrew. The entire Brand Architecture will be reviewed and it is highly likely that ADC’s and
Andrew’s products will retain their names as they have market brand equity.
31. What will happen to the Andrew flash?
The fate of the two companies’ individual brands has not been decided. However, the flash is a
powerful brand mark and its associated brand equity will be identified and included in the
Brand Analysis.
32. What impact on Andrew’s benefits and profit sharing plans?
For one year after the merger, Andrew employees in each country will be provided a benefits
package that in the aggregate is no less favorable than their current package or a package no less
favorable then the ADC current package.
33. Will my job change?
For today, there are no changes. Each of us at Andrew continues in our current role and must
remain focused on achieving outstanding results for our fiscal third and fourth quarters. Upon
merger closing, it is inevitable that some jobs will change due to the new requirements of the
combined companies.
34. Will I have a new boss?
Reporting relationships beyond Tier 1 levels in the new company have not been determined
as yet.
35. Why is Ralph not the CEO?
There can be only one CEO in the new company, and Ralph and his ADC counterpart, Bob Switz,
mutually agreed that that role would be best served by Bob.
36. Which executives will not stay on?
At this time, we know that Ralph Faison, our CEO, and Marty Kittrell, our CFO, will not have roles
in the new company.
37. How do I benefit from this merger?
Employees in general benefit from being part of a larger, better positioned entity with greater
capabilities to profitably grow as the industry evolves. In addition, all Andrew
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employees
who also are shareholders will benefit from an initial market premium in the share price.
38. Will Andrew bonuses for FY06 be affected?
Only to the extent that we lose focus on what we need to accomplish to achieve great results
for our fiscal third and fourth quarters. If realized, bonus payouts will be made according to
our normal schedule.
39. What do we do from now until the deal is closed?
For each of us, the answer is to focus intently on our day-to-day business and concentrate of
achieving great results for our fiscal third and fourth quarters. Except for those asked to serve
on integration teams, this merger announcement changes nothing for how we should be running
business today.
40. How does this affect customer proposals we have outstanding?
There is no effect.
41. How does this affect customer contracts?
There are some technical requirements in legal contracts that often require notifications, and in
some cases, permission from the customer. Our legal department will complete its review shortly.
We do not anticipate any major issues.
42. Will ADC have layoffs?
Yes, ADC also will be impacted by some redundancies after the companies have been merged. We
won’t know specifics for a while.
43. What is triple-play and why is it a big deal?
Our customers increasingly are looking to converge fixed and wireless networks to more effectively
handle the increasing amounts of “triple play” traffic (voice, data, video) being generated. As
convergence and triple play grow in importance, it leaves Andrew vulnerable unless we can add to
our market-leading wireless capabilities.
44. Are our executives getting guaranteed payouts from doing this merger? How much and why?
As is standard industry practice, our executives have severance agreements that provide payments
in the event of a change in control, details of which will be disclosed in the merger offering
memorandum to shareholders.
45. What happens to corporate staff at AHQ and the location itself?
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We anticipate that there will be redundancies between the two companies’ headquarters functions,
whether at AHQ or elsewhere, and that jobs will be eliminated as a result. However, we won’t
know how many positions and which ones at either company until the integration teams have
evaluated our go-forward plans. We won’t know which, if any, facilities will be impacted until
the integration teams complete their work.
46. What happens to Andrew corporate staff that are non-AHQ based?
We anticipate that there will be redundancies between the two companies’ headquarters functions,
whether at AHQ or elsewhere, and that jobs will be eliminated as a result. However, we won’t
know how many positions and which ones at either company until the integration teams complete
their work.
47. Why can’t you answer all the questions we have right now?
We welcome all questions you may have, but please recognize that many of the details surrounding
future circumstances of our teams and our merged companies still have to be worked out. We are
committed to sharing information with our people as soon as we are able.
48. Are we going to merge SAP business systems?
It is likely that the two SAP systems of ADC and Andrew will be merged together at the some time
in the future but that will probably be some time out, certainly past the deal close.
49. When will I know if I am safe? At least if you can’t tell me what is going to happen to me, can you give me a date?
No specific timetables or details are available at this time. We will let you know
information as soon as possible.
50. What happens with ACI, our under-construction Joliet facility?
Existing plans for construction and move to ACI are unchanged.
51. What happens to the data center move?
The AOP Data Center move is closely related to the move to ACI as well as the widening of
153rd Street so at this time it is considered to be important to make the move as soon
as possible to ensure Andrew Business Systems availability. It is also required in the unlikely
event that the deal did not finalize in four to six months.
53. What happens to my Andrew stock?
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Andrew stock will be exchanged into shares ADC stock at a ratio of 0.57 shares of ADC for each
Andrew share owned.
54. Which Andrew board members will join the newly combined board?
The new company’s board will consist of 12 members, four of which are from Andrew’s current board.
Safe Harbor for Forward Looking Statements
This material contains statements regarding the proposed transaction between ADC and Andrew, the
expected timetable for completing the transaction, future financial and operating results, benefits
and synergies of the proposed transaction and other statements about the future expectations,
beliefs, goals, plans or prospects of the management of each of ADC and Andrew. These statements
are based on current expectations, estimates, forecasts and projections and management assumptions
about the future performance of each of ADC and Andrew and the combined company, as well as the
businesses and markets in which they do and are expected to operate. These statements constitute
forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act
of 1995. Words such as “expects,”“believes,”“estimates,”“anticipates,”“targets,”“goals,”“projects,”“intends,”“plans,”“seeks,” and variations of such words and similar expressions are
intended to identify such forward-looking statements which are not statements of historical fact.
These forward-looking statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to assess. Actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking statements. Factors
that may cause actual outcomes to differ from what is expressed or forecasted in these
forward-looking statements, include, among other things: the ability to consummate the proposed
transaction; difficulties and delays in obtaining regulatory approvals for the proposed
transaction; difficulties and delays in achieving synergies and cost savings; potential
difficulties in meeting conditions set forth in the definitive merger agreement; fluctuations in
the telecommunications market; the pricing, cost and other risks inherent in long-term sales
agreements; exposure to the credit risk of customers; reliance on contract manufacturers and other
vendors to provide goods and services needed to operate the businesses of ADC and Andrew;
fluctuations in commodity prices; the social, political and economic risks of the respective global
operations of ADC and Andrew; the costs and risks associated with pension and postretirement
benefit obligations; the complexity of products sold; changes to existing regulations or technical
standards; existing and future litigation; difficulties and costs in protecting intellectual
property rights and exposure to infringement claims by others; and compliance with environmental,
health and safety laws. For a more complete list and description of such risks and uncertainties,
refer to ADC’s Form 10-K for the year ended October 31, 2005 and Andrew’s Form 10-K for the year
ended September 30, 2005 as well as other filings made by ADC and Andrew with the United States
Securities and Exchange Commission (the SEC). Except as required under the US federal securities
laws and the rules and regulations of the SEC, ADC and Andrew disclaim any intention or obligation
to update any forward-looking statements after the distribution of this press release, whether as a
result of new information, future events, developments, changes in assumptions or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction, a registration statement on Form S-4 will be filed
with the SEC. SHAREHOLDERS OF ADC AND STOCKHOLDERS OF ANDREW ARE ENCOURAGED TO READ THE
REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT
PROXY STATEMENT/ PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. The final joint proxy statement/prospectus will be
mailed to shareholders of ADC and stockholders of Andrew. Investors and security holders will be
able to obtain the documents free of charge at the SEC’s web site, www.sec.gov. Investors and
security holders may also obtain the documents free of charge from Investor Relations at ADC by
writing Investor Relations, ADC Telecommunications, Inc., P.O. Box 1101, Minneapolis, Minnesota55440-1101; or calling 952-917-0991; or at
www.adc.com/investorrelations/financialinformation/secfilings/. Investors and security
holders may also obtain the documents free of charge from Investor Relations at Andrew by writing
Investor Relations, Andrew Corporation, Westchester, Illinois60154; or calling 800-232-6767; or at
www.andrew.com/investors/sec
Participants in Solicitation
ADC, Andrew and their respective directors and executive officers and other members of management
and employees may be deemed to be participants in the solicitation of proxies in respect of the
merger. Information concerning ADC’s participants is set forth in the proxy statement dated,
January 24, 2006, for ADC’s 2006 annual meeting of shareholders as filed with the SEC on Schedule
14A. Information concerning Andrew’s participants is set forth in the proxy statement, dated
December 30, 2005, for Andrew’s 2006 annual meeting of stockholders as filed with the SEC on
Schedule 14A. Additional information regarding the interests of participants of ADC and Andrew in
the solicitation of proxies in respect of the merger will be included in the registration statement
and joint proxy statement/prospectus to be filed with the SEC.
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Dates Referenced Herein and Documents Incorporated by Reference