Bookham’s New Focus on non-telecom business
It is anticipated that Bookham will issue approximately 84 million new ordinary shares to New Focus shareholders, valuing the transaction at approximately £117.6 million ($190.5 million) based on Bookham’s closing share price on September 19.
After a cash distribution to its existing shareholders, New Focus is expected to hold approximately £65 million ($105 million) in cash at the anticipated closing date in December 2003.
Following completion of the transaction, the current stockholders of Bookham and New Focus will own approximately 73% and 27% of Bookham, respectively.
Bookham describers the transaction as “a continuation of [our] consolidation strategy. The proposed acquisition [should] increase the critical mass of Bookham’s non-telecom business, diversify its customer base, contribute low cost manufacturing facilities and provide significant additional cash resources.”
New Focus provides photonics and microwave products to non-telecom diversified markets, including the semiconductor, defense, research, industrial, biotech/medical and telecom test and measurement industries.
Bookham says that one of the key reasons for the acquisition is to allow it to diversify into these industries. On a pro forma basis, as if the two businesses had been combined for the first six months of 2003, Bookham’s non-telecom revenue contribution would have been 20% (it was in fact 6%).
The acquisition should also reduce Bookham’s dependence on key telecom customers; Nortel and Marconi respectively accounted for 60% and 13% of Bookham’s revenue in the first six months of 2003. The deal will bring important non-telecom customers such as KLA Tencor and ASML, as well as other major semiconductor capital equipment manufacturers and several tier-one defense contractors.
Other key factors behind the deal are New Focus’s state-of-the-art manufacturing facility in Shenzhen, China, which is expected to lower Bookham’s manufacturing costs, and the addition of approximately £65 million to Bookham’s already substantial cash balance, which was £70.8 million ($115 million) at the close of the second quarter 2003.
Finally, Bookham expects cost savings resulting from the proposed transaction to accelerate Bookham’s goal of achieving positive cash flow.
“We believe the acquisition of New Focus will enable us to achieve greater economies of scale, increasing manufacturing and cost efficiencies, while reducing our market risk and giving us greater financial strength,” said Giorgio Anania, president and CEO of Bookham.
“Our skills and knowledge in the application of photonics to non-telecom markets, combined with Bookham’s component technologies, should enhance the combined company’s ability to serve these markets,” said Nicola Pignati, chairman, president and CEO of New Focus.
