Fiber Component Makers to Merge
By Sinead Carew
NEW YORK (Reuters) - Avanex Corp. , a maker of components for fiber optic telecommunications networks, on Tuesday said it agreed to acquire rival Oplink Communications Inc. , in a move to broaden its customer base.
Oplink and Avanex make passive optical devices that manipulate light rays in fiber optic networks, which are used for high speed communications.
Oplink's products could be integrated in Avanex modules said analyst Pierre Maccagno, vice president at Needham & Co. Inc.
Maccagno also said the deal could give Avanex enough cash to buy again. The companies said their combined pro forma cash would have been $430 million at the end of last year.
"The telecoms market has low visibility and there are quite a few players so this was a good opportunity to consolidate," said Maccagno.
"Oplink has off-shore manufacturing so Avanex could get the advantage of lower costs. Avanex will also have more cash to make further acquisitions," Maccagno said.
Neither company makes active optical components, which are used to put inactive fiber optic cables -- so-called dark fiber -- into operation. Maccagno suggested that Avanex could look for another acquisition in this area.
Active photonics developers include New Focus Inc. and Bandwidth9 Inc. The big shots in Avanex's field include JDS Uniphase Corp. and Corning Inc.
The terms of the deal call for Fremont, California-based Avanex to exchange 0.405344 share of its common stock for each share of Oplink. Upon completion of the deal, Avanex and Oplink shareholders would each own about 50 percent of the combined company, to be called Avanex.
The exchange ratio values San Jose, California-based Oplink's shares at about $1.75, near their Monday closing Nasdaq price of $1.73.
Avanex stock was off 3 cents at $4.30 in midday trading on the Nasdaq, while Oplink was off 1 cent at $1.72.
Based on their stock prices, the combined companies' market capitalization would be about $610 million, they said. The companies expect net cost savings of about $15 million in the first full year after the transaction. |
