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OCP administers "poison pill" to Oplink takeover

Optical Communication Products unveils a shareholder rights plan to defend itself against fellow module supplier Oplink's buy-out bid, which Oplink has promptly challenged the legality of.

The merger between the California-based optical communications companies Oplink and Optical Communication Products seems increasingly unlikely as OCP has issued a shareholder rights plan “to protect minority shareholders”.

On April 24, Oplink had announced a deal to take a 58 percent majority share in OCP, by purchasing fiber-maker Furukawa Electric's holding (see related story).

Known in the business world as a “poison pill” because of the likely detrimental effect of the move on a takeover, OCP's rights plan entitles the owner of each existing share to receive another preferred share of approximately equal value.

Oplink has responded by filing a lawsuit against OCP to scrap the plan, with CEO Joe Liu saying, “the interests of the minority shareholders are not threatened by the transfer of Furukawa's OCP stake to Oplink.”

Having not been present at the conference call announcing Oplink's bid to acquire the controlling stake from Furukawa, OCP's management has reacted coldly to Oplink's offer to acquire the remaining outstanding shares at a price of $1.50 per share.

OCP's chairman, Hobart Birmingham, stated, “We have adopted this limited shareholder rights plan as a precautionary measure to protect our shareholders while we carefully consider Oplink's unsolicited offer to acquire OCP's minority shares.”

The plan becomes exercisable under any of three conditions: when the deal between Oplink and Furukawa closes; the acquisition of more than 15% of OCP's common stock by a third party; or the acquisition of additional shares by Furukawa or Oplink.

Oplink's suit seeks a declaration that the poison pill is invalid, as it attempts to prevent the sale of Furukawa's shares taking place.

Furukawa's role in the matter remains unknown, however OCP has recently lessened its reliance on the Japanese company, who it currently buys laser chips from, with its acquisition of alternate laser maker Gigacomm.

After two previously unsuccessful merger and acquisitions ventures "“ an aborted buy-out of Ezconn and a merger with Avanex that was not approved by shareholders "“ Oplink now faces a period of legal wrangling to ensure that, with this deal, “three's the charm”.

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