MRV closes Fiberxon acquisition without audits

JULY 2, 2007 -- MRV could be delisted from NASDAQ if it can't come up with the audits within 75 days.

JULY 2, 2007 -- MRV Communications Inc. (search for MRV) and its wholly owned subsidiary, Luminent Inc. (search for Luminent), have announced that MRV closed its previously announced acquisition of Fiberxon, Inc., effective July 1, 2007. The move comes despite the fact that Fiberxon management has so far failed to deliver audited financial statements for 2004-2006. MRV could be delisted from NASDAQ if it can't come up with the audits within 75 days.

The closing means that former stockholders of Fiberxon are entitled to receive a combination of cash, shares of MRV common stock, and a deferred consideration payment, and MRV assumed all outstanding options to purchase shares of Fiberxon common stock on a basis that preserves the intrinsic value of such options. The acquisition announcement put the price of the deal at $131 million.

MRV reiterated that it intends to combine Fiberxon with Luminent and operate the combined business under a single unified management team. MRV also previously has expressed interest in spinning out the combination as a separate, publicly traded company in the future.

Commented Noam Lotan, president and CEO of MRV, "We are very excited about closing the acquisition of Fiberxon, and believe that its combination with Luminent creates one of the largest, most comprehensive manufacturers of optical transceivers for telecommunications networks. The combined company is expected to be a leader in providing BPON, GPON, and GE-PON transceivers for the fast growing FTTX market and will also have a strong position in supplying metro transceivers including the rapidly expanding 10-gig opportunity."

Near Margalit, CEO of Luminent, stated "We are dedicated to integrating Fiberxon and Luminent and believe the combination of the two companies addresses our customers' growing need for optical component suppliers that provide a broader range of solutions, continued device innovation and competitive prices. The addition of Fiberxon allows us to significantly increase customer diversification and expand our presence in lower-cost Asian manufacturing operations. In addition, the consolidation of our supply chains, manufacturing lines, and technical expertise should reduce the cost of production through economies of scale and increased productivity. We also believe the unification of the two senior management teams will strengthen the combined company providing an experienced leadership team focused on capitalizing on the many opportunities in front of us."

However, the missing audits could prove troublesome. MRV says that Fiberxon "had been able to fulfill substantially all of its closing conditions." However, when it came to the audits, "Fiberxon and its auditors could not commit or estimate as to when such financial statements would be available," MRV added. The company's board of directors decided to move forward with the closing anyway.

Under Securities and Exchange Commission regulations, MRV is required to file the audited financial statements within 75 days of the closing date of the acquisition. If MRV does not receive the audited financial statements within the required period the company may face consequences, including, among others, possible delisting of its common stock from NASDAQ. It also might experience a default on its outstanding convertible notes requiring accelerated repayment or conversion, and an inability to use Form S-3 when registering securities, including for any post-effective amendments of existing effective registration statements.

"Despite Fiberxon's difficulties in providing us with audited financial statements prior to closing, we believe that its fundamental business is sound, its employees are committed and enthusiastic, and that its presence in the People's Republic of China provides MRV and Luminent a key strategic advantage," Lotan concluded.

Merriman Curhan Ford & Co. acted as financial advisor to MRV Communications, Inc. on the acquisition of Fiberxon.

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