05 Jul 2011
The US company adds to its photonics portfolio with a $52M cash acquisition of Aegis Lightwave and subsidiary AOFR.
II-VI has further expanded its optical technologies portfolio with the $52 million acquisition of Aegis Lightwave, a privately-held company specializing in tunable optical devices and optical channel monitors (OCMs) used in both telecommunications and industrial applications.
Pittsburg-based II-VI had been expected to make just such a move after posting strong financial results in its last few quarters and building up a cash balance of nearly $130 million. It financed the Aegis deal partly with $15 million borrowed through a new low-interest debt facility, with the balance financed directly from its cash balance.
Primarily, the acquisition adds to II-VI’s presence in the optical telecommunications sector. Aegis posted revenues of $26.6 million in calendar 2010, from key products including OCMs designed for reconfigurable optical add-drop multiplexer (ROADM) components and optical couplers used in erbium-doped fiber amplifiers (EDFAs).
Its products are based on thin-film semiconductors combined with optical interference coatings, whose transmission properties can be controlled by changing the temperature of the semiconductor layer.
Telecommunications applications represent around 70% of Aegis’ current business, but that is not the only market that the company serves. In March 2009, Aegis acquired its Australian subsidiary AOFR from its previous owner Arasor, expanding its reach into sensing, military and industrial sectors.
AOFR’s main products are fused fiber components used in fiber laser systems that are fast gaining market share in the industrial laser sector. While Aegis will officially sit within II-VI’s “near-infrared optics” reporting segment, and will partner the company’s existing Photop Technologies business, the AOFR division will also fit well with II-VI’s HIGHYAG Lasertechnologie subsidiary, which manufactures fiber-based delivery systems for industrial lasers.
Discussing the acquisition with investors, II-VI CEO Frank Kramer said that the global OCM market was currently worth around $100 million, and that it would double in size over the next 4-5 years as greater flexibility was demanded within fiber-optic networks to handle internet traffic.
Kramer also estimated that the available market for the couplers made by AOFR stands at around $60 million, and will grow at a slightly slower rate than that for OCMs.
With the additional business from the Aegis acquisition, II-VI now expects to post total sales of between $595 million and $615 million for its fiscal year ending June 2012. Although a significant chunk of that total relates to non-photonic technologies such as wide-bandgap crystal materials, around 25% of the turnover will now come from telecommunications applications.
II-VI says that it has committed to capital investments in Aegis, with the new subsidiary’s president Jeffrey Farmer saying: “By joining forces with II-VI we will have access to significantly more resources and markets, especially through the near-infrared optics business segment, further securing our capabilities in research and product development, sales and marketing, and manufacturing operations.”
Aegis currently has around 60 full-time employees across its sites in Massachusetts, New Jersey and Canberra, Australia. II-VI says that at present it has no plans to consolidate any overlapping activities following the acquisition, although it has not yet clarified how Aegis’ senior managers will be incorporated into the wider corporate structure.