22 Sep 2003
The UK company plans to buy New Focus while beefing up its datacoms business with Ignis Optics.
Under the terms of the proposed deal, New Focus shareholders will receive a combination of cash and new shares in Bookham. Based on current stock prices, the transaction is valued at $191 million (£118 million).
If approved, the acquisition will reduce Bookham’s dependency on its major customer, Nortel Networks, while also significantly increasing its cash reserves. It would also go some way to reducing Bookham’s exposure to the apparently endless telecoms slump.
New Focus, which makes a variety of photonic and microwave subsystems, including tunable lasers, is headquartered in San Jose, California and has a manufacturing facility in Shenzhen, China. Intel purchased the rights to New Focus’s tunable laser assets for telecoms applications in May last year for $50 million, shortly after US-based Finisar had acquired the company’s passive optical component technology.
New Focus will distribute $140 million in cash to its shareholders (equivalent to $2.19 per share) if they approve the acquisition. That will leave the company with a cash reserve of $105 million for Bookham to draw on in addition to its existing moneypot, which contained $115 million at the close of the previous quarter.
The New Focus offer comes hot on the heels of several recent acquisitions, in which Bookham has acquired the optical components divisions of Nortel Networks and Marconi, plus the US thin-film filter specialist Cierra Photonics.
As a result of the terms of the Nortel and Marconi acquisitions, Bookham has become heavily dependent on these companies and Nortel alone accounted for some 62% of the company’s sales in the most recent financial quarter. Although sales to New Focus’s customers will reduce this dependence, Nortel would still represent over half of Bookham’s sales based on current figures.
Bookham shareholders will also be pleased to see the additional cash reserve that the New Focus acquisition would release. However, Bookham will have to cope with some extra cash-burn when taking on the New Focus business – the company reported a net loss of $12.3 million on sales of just $12.4 million for the first six months this year.
Based on the most recent figures, the deal will leave Bookham sitting on a cash balance of $220 million with a quarterly cash burn of around $35 million per quarter.
The companies expect the deal to be completed by December this year.
• Bookham has subsequently announced that it will also acquire Ignis Optics. The San Jose-based company designs and manufactures singlemode optical transceivers for optical datacom and telecom networks.
The all-share deal is initially worth $15.5 million, and Bookham will issue additional shares up to a value of $1.5 million in early 2005 if Ignis hits its targets next year.
Bookham president Giorgio Anania said: "To date we have not played significantly in the datacom market. With the agreement to acquire Ignis, we are signalling our intent to enter this market."
Michael Hatcher is technology editor of Opto & Laser Europe magazine.