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19 Mar 2024
EM4 subsidiary specializing in active optoelectronic components and packaging sold to unspecified US buyer.
Gooch & Housego (G&H), the maker of photonic components and subsystems, is selling its “EM4” subsidiary near Boston, Massachusetts, in a deal worth up to $12 million.
London-listed G&H, which says that the divestment is part of a wider strategic realignment, says that it will use the proceeds of the sale to reduce current borrowings.
The unspecified buyer - described as a “US-based global technology company” - is set to pay an initial $5.25 million for the division, with a further consideration of up to $6.75 million dependent on EM4’s financial performance over the next 18 months.
Fused couplers
Acquired by G&H from its initial venture backers back in 2011 in a deal valued at up to $19 million, EM4 manufactures optoelectronic components and laser modules primarily used in aerospace and defense applications in the US.
“The business also manufactured and supplied fused fiber couplers, but this product line has been excluded from the sale and transferred to [our] Torquay [UK] facility,” clarified G&H in a regulatory filing.
Its CEO Charlie Peppiatt, who has been implementing a strategic review including two acquisitions since his 2022 appointment, described the agreement as “an important milestone” in the firm’s attempts to grow profit margins.
“The divestment of EM4 is the result of a carefully considered and ongoing review of our aerospace and defense product portfolio,” he said, adding that it supported the firm’s consolidation of defense-related activities into areas where it can offer differentiated products, and grow its optical systems business.
G&H stressed that the optoelectronics product line will continue to be manufactured and available for purchase under EM4's new ownership, which is said to bring a strong and highly complementary technology base in laser and photodetector ICs for mission-critical applications.
"The team on the ground in Boston will continue to operate the business, and we will provide you with more details, including any updated contact information, in the coming days," stated the firm.
Deferred programs
News of the deal follows last month’s annual general meeting, at which G&H said it had been notified that certain defense-related programs in the US had either been deferred, or would no longer go ahead.
As a result, pre-tax profits in the firm’s current financial year will be around £3 million lower than previously expected - news that sent its stock price down around 20 per cent.
On the plus side, the build-out of new production and research facilities at G&H’s US medical diagnostics hub, located within the recently acquired GS Optics campus in Rochester, New York, is said to be progressing well.
“We have secured our first customer order for our US R&D team at the facility and are in discussions with a number of other life sciences customers for further R&D and production orders to be supplied from the facility,” the company reported at the time, also hinting at the EM4 agreement when saying that “near-term actions” were on the way for the aerospace and defense business.
According to the most recent G&H financial results, released in December, the company has a net debt of £31 million - a figure that includes lease liabilities totaling £10.8 million.
The same results filing showed that the EM4 division had posted a pre-tax loss of £0.7 million on sales of £13.4 million, suggesting that the divestment should also help G&H’s efforts to improve margins.
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