Corning targets data center, new markets with AFOP buy

Corning Inc. (NYSE: GLW) plans to buy passive optical components supplier Alliance Fiber Optic Products, Inc. (NASDAQ: AFOP) for $18.50 per share in cash, an approximate total of $305 million, the two companies have announced.

Corning Inc. (NYSE: GLW) plans to buy passive optical components supplier Alliance Fiber Optic Products, Inc. (NASDAQ: AFOP) for $18.50 per share in cash, an approximate total of $305 million, the two companies have announced.

Corning expects the acquisition will strengthen its hand in the cloud data center market as well as expand its Asian presence. As AFOP has supplied technology to Corning for some time, Corning also expects to derive cost reductions from the deal. Corning plans to integrate the new assets into its Optical Communications business segment.

The $18.50 offer price represents a 32% premium to the one-month average closing price prior to the announcement and a 20% premium to the closing price on April 7, 2016, Corning points out. The tender offer is expected to begin within the next 10 business days. A merger will follow in which all AFOP common stock not tendered into the tender offer (other than shares for which appraisal rights have been properly exercised) will be converted into the right to receive $18.50 in cash per share.

The boards of both companies have approved the deal, which they expect to complete this quarter.

AFOP was founded in 1995 and is headquartered in Sunnyvale, CA. Company management recently announced preliminary first quarter 2016 revenues of approximately $12.4 million, which would be lower than previous guidance. Revenues for 2015 were $81,189,000, down 6% from 2014. AFOP saw a net profit of $13,038,000 ($0.74 per basic share) for the year, also down from 2014, when the company earned a net profit of $14,508,000 ($0.78 per basic share).

The company has manufacturing and product development operations in the U.S., Taiwan, and China. It offers an array of connectivity products as well as such passive components as multiplexers, variable optical attenuators, switches, and other components (see, for example, "AFOP launches LC and SC adapters with external or internal shutters").

"Combining AFOP's components expertise with Corning's broad portfolio of connectivity solutions further strengthens our position in the high-growth, cloud data center market segment," said Clark S. Kinlin, executive vice president, Corning Optical Communications. "And, it adds additional products that Corning can offer our broad customer base while providing an opportunity for manufacturing synergies."

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