Redback Networks Inc., a San Jose, Calif., developer of edge-routing technology for broadband networks, announced Tuesday a definitive agreement to be acquired by telecommunications supplier Ericsson for $2.1 billion, or $25 dollars per Redback share. The acquisition is expected to occur by means of a tender offer for all of the outstanding shares of Redback common stock. Subject to customary closing conditions and regulatory approvals, it is expected to be completed in early 2007. Redback will retain its management team and operate as a wholly-owned subsidiary of Ericsson. Ericsson said it intends to maintain Redback's offices and facilities in San Jose and elsewhere. Redback said the acquisition will play a key role in Ericsson’s strategy to help telecommunications carriers lower costs and upgrade their networks for broadband, telephone, video and mobility services. It said it plans to accelerate its product development and continue to expand its operations to meet growing customer demands for broadband networks, and that it will continue to focus on video and mobility routing markets. The offer, which is expected to commence within the next week, will be subject to customary conditions including anti-trust and other regulatory clearances and the acquisition by Ericsson of a majority of Redback's shares. "The acquisition is expected to be accretive from 2008, excluding possible non-cash charges relating to amortization associated with acquired intangibles," Ericsson said in a a statement. "The transaction will be slightly dilutive in 2007, mainly due to one-time costs associated with the transaction. It will be conducted by means of a tender offer for all of the outstanding shares of Redback." The board of directors of Redback has unanimously recommended that the shareholders of Redback accept the offer, the companies said. Redback was founded in 1996 in San Jose and was listed on NASDAQ in 1998. It has over 700 carrier customers in more than 80 countries and employs about 800 people, including 500 research and development engineers. Fifteen of the top 20 telephone carriers worldwide use Redback's technology, including broadband routers to manage IP-based data, voice and video services. Redback has a strong position in multiservice edge-routing technology, Ericsson said, which helps carriers deliver broadband, telephone, TV and mobility services over Internet-based infrastructures. The company's sales grew 33 percent in 2005 and 87 percent for the first nine months of 2006, to $197 million. Carl-Henric Svanberg, president and CEO of Ericsson, said,"The combined strengths of both companies will create significant value for customers and shareholders and exciting opportunities for employees. The pace of IP deployment is accelerating as operators move to all-IP converged networks, in which quality of service requires increasingly intelligent routers with higher capacity." Kevin DeNuccio, Redback president and CEO, will report directly to a management board chaired by Svanberg. DeNuccio said, “This agreement is about accelerating market growth, integrating IP routing and mobility expertise and shaping the future of next-generation networks. Video changes everything about networks today." Citigroup and SEB Enskilda are acting as Ericsson's financial advisors in the transaction. For more information, visit: www.ericsson.com