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Efficient Networks to Buy NetScreen Technologies in $905 Million Stock Deal

Efficient expects to complete the transaction toward the end of its fiscal fourth quarter, which ends June 30.

Efficient Networks

(EFNT)

, a maker of high-speed digital subscriber line technology for the broadband access market, said Tuesday it had signed a definitive agreement to acquire Internet security products developer

NetScreen Technologies

in a stock deal valued at $905 million.

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Under the terms of the deal, Efficient of Dallas said it would issue about 5.28 million shares of its common stock in exchange for all of privately held NetScreen's outstanding stock and options.

Efficient shares were up 1/8 to 171 11/16 in early trading Tuesday. (Efficient closed down 13 9/16, or 8%, at 158).

The companies said that the acquisition would help to improve security over high-speed Internet connections.

"Combining high-performance security products with high-performance DSL access equipment is a natural fit,'' Mark Floyd, Efficient's chairman, president and chief executive officer, said in a statement. "Efficient will benefit immediately by expanding our solution set to include NetScreen security devices."

Upon completion of the transaction, shareholders and employees of NetScreen, which is based in Santa Clara, Calif., will own approximately 8% of the combined company on a fully diluted basis. NetScreen is expected to have annualized run rate revenues of $22 million based on the expectations for the quarter ending March 31, 2000. NetScreen has 125 employees.

Efficient expects to complete the transaction toward the end of its fiscal fourth quarter, which ends June 30, 2000. It will be accounted for as a purchase and is intended to qualify as a tax-free reorganization.