Bookham Technology to acquire New Focus in USD190m deal

22 September 2003 Oxfordshire, UK / San Jose, CA Lightwave Europe -- Bookham Technology and New Focus Inc today announced the signing of a definitive agreement under which Bookham will acquire New Focus.

- Proposed acquisition of New Focus expected to increase the critical mass of Bookham's non-telecom business, diversify its customer base, contribute low cost manufacturing facilities and boost cash resources.


22 September 2003 Oxfordshire, UK / San Jose, CA Lightwave Europe -- Bookham Technology and New Focus Inc today announced the signing of a definitive agreement under which Bookham will acquire New Focus.

Bookham says it will issue 84 million new ordinary shares taking into account the assumed exercise of New Focus stock options in a share-for-share transaction which values the transaction at approximately GBP118 million (USD190 million) - based on the closing share price of Bookham Ordinary Shares on the London Stock Exchange on 19 September.

The stockholders of New Focus may elect to receive the shares in the form of New Ordinary Shares or Bookham American Depository Shares.

Immediately prior to the completion of the acquisition, New Focus will make a cash distribution of GBP 86 million (USD 140 million) to its stockholders by way of a capital repayment. After consideration of this distribution and anticipated net cash outflows prior to completion, New Focus's cash at the anticipated closing date in December 2003 is expected to be approximately GBP 65 million (USD 105 million).

Bookham says that the proposed transaction - which has been unanimously approved by the boards of directors of both companies - is a continuation of its "consolidation strategy". The proposed acquisition of New Focus is expected to 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
New Focus is a leading provider of photonics and microwave solutions to non-telecom diversified markets, including the semiconductor, defence, research, industrial, biotech/medical and telecom test and measurement industries.

Important product solutions include tunable lasers, microwave RF amplifiers, optoelectronics, photonics subsystems and photonic tools. New Focus's operations are located in San Jose, California, where the company employs approximately 200 people. The company also has a manufacturing facility in Shenzhen, China.

The company had a market capitalisation of approximately GBP 163 million (USD 265 million) on 19 September 2003 and reported sales of GBP 7.8 million (USD 12.4 million) and a net loss of GBP 7.7 million (USD12.3 million) for the six months ended 29 June 2003, each calculated in accordance with US GAAP. The net loss included GBP 1.4 million (USD 2.1 million) in restructuring charges.

Bookham's strategy
Bookham says that the proposed acquisition of New Focus is a continuation of its consolidation strategy. The company believes that the key benefits of the transaction, if consummated, will include the following:

1. Accelerated expansion of Bookham's non-telecom optical business � New Focus's revenue is predominately generated from non-telecom markets, including the semiconductor capital equipment and defence 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 increase from 6% to 20%. Bookham believes that the businesses of Bookham and New Focus are synergistic and will be able to build upon complementary strengths.

2. Reduced dependency on major telecom customers - New Focus is expected to bring significant non-telecom customers to the proposed combined entity. Important New Focus customers include KLA Tencor, ASML, other major semiconductor capital equipment manufacturers and several tier-one defense contractors.
On a pro forma basis, as if the two businesses had been combined for the first six months of 2003, Nortel's and Marconi's contribution to Bookham's gross revenues would change from 60% to 51% and from 13% to 11%, respectively.

3. Expanded cost efficient manufacturing capability � New Focus's state-of-the-art manufacturing facility located in Shenzhen, China, is expected to lower Bookham's manufacturing costs. Furthermore, this acquisition, if consummated, will provide an opportunity to expand Bookham's presence in Silicon Valley.

4. Significant increase in cash reserves � New Focus's cash balance at closing is expected to be approximately GBP 65 million (USD 105 million). This would add to Bookham's already substantial cash balance, which was GBP 70.8 million (USD 115 million) at the close of Q2 2003.

5. Accelerated time to breakeven � Bookham expects cost savings resulting from the proposed transaction to accelerate Bookham's goal of achieving positive cash flow.

Customer demands
Giorgio Anania, President and Chief Executive Officer of Bookham, said, "Consolidation in our market is being driven by customers' demands for fewer, larger optical component and subsystem suppliers that can deliver cost competitive pricing through economy of scale.

"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.

"Operationally, we believe Bookham's and New Focus's strengths are complementary and should enable the combined company to continue to reduce manufacturing costs and hence further reduce our breakeven point.

Bookham's leading-edge manufacturing capability in our Paignton, Caswell, Zurich and Santa Rosa facilities will also be able to supply key infeeds into New Focus's products. Together, we expect that the combined manufacturing capabilities of the new company will represent a powerful combination going forward."

Nicola Pignati, Chairman, President and CEO of New Focus added, "This transaction allows our stockholders to receive a balanced return in the form of a cash distribution and a significant equity ownership position in Bookham. The Bookham management team has done an outstanding job in restructuring and repositioning the company for future success.

"Our cash and manufacturing facilities in the Silicon Valley and China will add strong support to Bookham's strategic plans. Additionally, 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."

Terms of the deal
Bookham expects to issue approximately 84 million New Ordinary Shares, taking into account the exercise of assumed New Focus stock options, to the New Focus stockholders as consideration for the proposed acquisition.

Additionally, immediately prior to completion of the transaction, New Focus stockholders will receive a cash distribution of approximately GBP86 million (USD140 million). This cash distribution will be funded from New Focus's existing cash balance which, as reported on 29 June 2003, were GBP155 million (USD252 million).

At closing, for every share of New Focus common stock held as of the record date, each New Focus stockholder will receive 1.2015 New Ordinary Shares and approximately USD 2.19 in cash.

This equates to a total consideration of approximately USD 4.91 per share based on the closing price of Bookham Ordinary Shares on the London Stock Exchange on 19 September 2003 of GBP 1.40.

New Focus options for the purchase of approximately 6.5 million shares will also be assumed and converted into the right to receive Bookham cash and shares on the same exchange basis. Following completion of the transaction, the current stockholders of Bookham and New Focus will own approximately 73% and 27% of Bookham, respectively.

In addition, Nicola Pignati, currently Chairman, President and Chief Executive Officer of New Focus, and Dr Peter Bordui, currently a New Focus board member, will join the board of Bookham.

The boards of Bookham and New Focus expect the transaction to be completed by December 2003, subject to, amongst other things, approval of the transaction being obtained from the shareholders of both companies and admission of the New Ordinary Shares to be issued as consideration for the transaction to the Official List of the UK Listing Authority and to trading on the London Stock Exchange.

A circular convening an extraordinary general meeting of the shareholders of Bookham will be sent to the shareholders of Bookham in due course. Completion of the transaction is also subject to customary closing conditions, including regulatory approval.

In addition, the stockholders of New Focus will receive copies of a Joint Proxy Statement/Prospectus in connection with New Focus's special meeting of stockholders. Officers and directors of New Focus and Bookham have agreed to vote in favour of the transaction.

Perseus Group is acting as financial advisor to Bookham and Cazenove is acting as sponsor to Bookham in connection with the acquisition of New Focus. Thomas Weisel Partners is acting as- financial advisor to New Focus in connection with this transaction.

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