Bookham Agrees to Acquire New Focus

Paula M. Powell

Following the acquisition of California companies Cierra Photonics of Santa Rosa and Ignis Optics Inc. of San Jose, Bookham Technology plc has signaled its intent to extend its acquisition strategy outside the telecom arena. The Abingdon, UK-based firm recently signed a definitive agreement to acquire New Focus Inc., also in San Jose, which manufactures photonics and microwave components for semiconductor, defense, research, industrial, telecom and biotech/medical test and measurement industries. Pending shareholder approval, the proposed transaction has an expected completion date of late December or early January.

According to Sharon Ostaszewska, Bookham director of communications, the firm's acquisitions since its April 2000 initial public offering have all been share-based. This will be no different, with the company expected to issue about 84 million new ordinary shares, taking into account the assumed exercise of New Focus stock options in a share-for-share transaction. Immediately prior to the sale's completion, she reported, New Focus will distribute roughly $140 million to its stockholders by way of a capital repayment.

The price tag for Ignis Optics was $15.5 million, which was to be satisfied by the issue at transaction completion of new Bookham shares of roughly equivalent value. In addition, the firm agreed to issue shares up to $1.5 million in early 2005 should Ignis meet certain performance criteria during the 2004 fiscal year.

Although Bookham has not yet had a profitable quarter since its initial public offering, Ostaszewska believes that the recent acquisitions strengthen its financial position on several fronts. They will expand its nontelecom optical business, and New Focus' anticipated cash balance of some $105 million at the closing will bolster Bookham cash reserves, which tallied roughly at $115 million at the end of the second quarter of 2003. The company is also looking to leverage New Focus' manufacturing facility in Shenzhen, China, to help decrease manufacturing costs across its product base.

The telecom acquisitions also were targeted at product line expansion. The purchase of Ignis brings Bookham further into the datacom market with a line of small-form-factor pluggable single-mode optical transceivers. The Cierra acquisition in July added thin-film filters to the telecom mix, which already includes Marconi's and Nortel's former optical components businesses. The key point to note, Ostaszewska said, is that the acquisitions related to telecom and datacom in particular strengthen Bookham's capability to act as a single-source supplier, even for subsystems, when demand picks up from network equipment manufacturers such as Marconi, Nortel and Alcatel.