22 March 2011

Finisar offers to acquire Ignis

Fiber-optic communications component and subsystem maker Finisar Corp of Sunnyvale, CA, USA has entered into a transaction agreement to make a recommended voluntary public cash offer to acquire all of the outstanding shares of Ignis ASA of Oslo, Norway not currently owned by Finisar for NOK8 per share, or an aggregate purchase price of up to about NOK425m ($76m).

Finisar has also just acquired a total of 18.3 million Ignis shares from certain existing Ignis shareholders, for NOK8 per share (a total of NOK147m, or $26m). This brings Finisar’s total ownership to about 25.7 million shares (32.6% of the outstanding Ignis shares on a fully diluted basis).

Listed on the Oslo Stock Exchange, Ignis provides optical components and network solutions for fiber-optic communications. It operates globally through four subsidiaries: Syntune in Sweden, Ignis Photonyx in Denmark, SmartOptics in Norway, and Fi-ra Photonics (71.8% owned) in Korea. The firm’s product and services portfolio comprises passive optical components including optical chips, splitters and multiplexers, active optical components such as tunable lasers and modulators, and WDM-based solutions enabling the building of high-capacity optical networks.

“Ignis has developed many innovative new technologies and currently offers multiple industry-leading products that are focused on attractive growth markets,” says Finisar’s CEO Eitan Gertel. “This acquisition represents an extension of our vertical integration strategy,” he adds. “Ignis has developed, amongst other of its product technologies, a tunable laser that is integrated with a modulator and a semiconductor optical amplifier (SOA) and that Finisar believes has the highest performance currently available in the market.” The tunable laser will be used in Finisar's 10Gbps tunable 300-pin and tunable XFP product lines. Finisar estimates that the combined worldwide market for these products will be about $250m in 2011 and will grow to $400m in 2015.

“This acquisition will also enable us to offer our customers a number of new 40/100Gbps products based on advanced optical device integration technologies from Ignis’ various business units,” Gertel says. “We look forward to working with the Ignis employees to grow our combined business,” he adds.

“Our unique technologies and innovative solutions are the base of the product platform we offer to a wide range of markets and customers around the world,” says Ignis’ CEO Thomas Ramm. “We have developed a strong collaborative relationship with Finisar and its employees over the years and believe that our two companies share a common culture focused on innovation... Finisar represents a strong strategic fit for Ignis.”

The offer price represents a premium of 58.4% over the closing share price of Ignis on 21 March (the last trading day prior to Finisar’s public announcement of its intention to make the offer) and a premium of 61.5% over the adjusted volume weighted average market price for the three month period preceding the announcement.

Certain Ignis shareholders, including all members of its management and board owning shares, have committed to accept the offer subject to certain conditions. The shares that have been committed on these terms represent about 19.7% of the outstanding shares of Ignis on a fully diluted basis and, together with the shares currently owned by Finisar, would total about 52.3% of the outstanding shares. NOK80m ($14m) of the consideration to be paid to certain of these shareholders will be subject to an escrow arrangement related to Ignis’ acquisition of SmartOptics Holdings AS last December and will be released to the former SmartOptics shareholders only upon the achievement of certain financial and other milestones related to the ongoing operations of the SmartOptics business.

Finisar has been informed by Ignis that another party has recently made an offer to acquire Ignis and that, after considering both offers, Ignis’ board of directors has adopted a resolution to recommend Finisar’s offer to its shareholders. An offer document setting forth the terms of Finisar’s offer will be distributed to all Ignis shareholders following review and approval by the Oslo Stock Exchange (expected in late March or early April). The Ignis board will issue a formal statement regarding Finisar’s offer as soon as the offer document is available.

Completion of the offer will be subject to the satisfaction or waiver by Finisar of customary conditions, including acceptance of the offer by the holders of at least 67% of the outstanding Ignis shares on a fully diluted basis. The transaction is not expected to require approval by competition or antitrust authorities in any jurisdiction. The offer will not be subject to any financing conditions and will be funded from Finisar’s existing cash resources. The offer and resulting purchases are expected to close early in Finisar’s fiscal first-quarter 2012 (ending 31 July 2011).

Ignis’ revenue of NOK68m for the quarter to end-December 2010 (NOK88m on a pro forma basis, including the operations of SmartOptics). Finisar expects the acquisition to be dilutive to its non-GAAP earnings per share by about $0.02 per share in its fiscal first-quarter but, subject to the achievement of anticipated synergies, to be accretive within a year following the closing.

The transaction agreement provides that the board of directors of Ignis may withdraw its recommendation only if it receives a competing offer that it considers to be more favorable to Ignis’ shareholders than Finisar’s offer. Under certain circumstances, including the withdrawal of the board's recommendation and the subsequent lapse of Finisar’s offer, Ignis would be required to pay a break-up fee of $1.5m to Finisar.

In connection with the transaction agreement, Finisar has agreed to provide Ignis with a bridge financing facility under which it may borrow up to $3m after 15 April for working capital purposes. Loans under the facility will bear interest at the rate of 5% per annum, will be secured by certain assets of Ignis, and will be payable on 31 December 2011.

See related items:

Finisar grows 57.6% year-on-year to record quarterly revenue of $263m

Finisar’s quarterly revenue up 16% to record $240.9m

Finisar’s fifth quarter of double-digit growth yields record revenue of $207.9m

Finisar’s quarterly revenue rises 12.9% to record $188.5m

Finisar grows 32.4% year-on-year

Tags: Finisar

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