MARCH 26, 2007 -- Finisar Corp. (search for Finisar), a provider of fiber-optic subsystems and network performance testers, has announced that it has entered into agreements under which it has agreed to acquire all of the outstanding equity interests in Wilmington, MA-based AZNA LLC (search for AZNA) and South Plainfield, NJ-based Kodeos Communications Inc. (search for Kodeos).
The agreement with AZNA was signed on March 23, with the acquisition to be completed today. The agreement with Kodeos was signed on March 15, and the acquisition is expected to be completed on or about April 5, subject to certain closing conditions. Both acquisitions broaden Finisar's product lines primarily for telecom applications while adding key technologies involving advanced modulation and electronic signal processing for cost-effectively extending the reach and tunability of transceivers and transponders for telecom and datacom applications.
"We have made great progress during the past year in penetrating the market for 10- to 40-Gbit/sec transceivers/transponders," says Jerry Rawls, Finisar's chairman of the board, president, and chief executive officer. "But we have not had a product offering which addresses the 10-Gbit/sec 300-pin transponder market for telecom applications that is expected to approach $300 million in 2008. We believe the acquisition of Kodeos can be the catalyst for penetrating this market in a differentiated way." He adds that the AZNA acquisition will give Finisar a competitive advantage "in terms of the cost, reach, and performance of our products" for telecom as well as datacom applications.
The AZNA acquisition will endow Finisar with Chirp Managed Directly Modulated Lasers (CMLs) that are believed to enable longer-reach optical transmitter solutions with lower cost, better performance, and less complexity than those based on externally modulated lasers (EMLs). AZNA's technology extends the reach of high-power, 10-Gbit/sec directly modulated lasers (DMLs) to 200 km and beyond and 2.5-Gbit/sec DMLs to beyond 640 km.
Kodeos' optical duobinary (ODB)- and maximum likelihood sequence estimator (MLSE)-based technologies will give Finisar the 10-Gbit 300-pin MSA transponder product line it is lacking. Kodeos ODB-based transmitters use data coding and filtering, resulting in optical pulse trains that have a narrower spectral width and therefore suffer less from chromatic dispersion and can be transmitted more than twice the distance of traditional transponders. Signal-processing integrated circuits based on MLSE can electronically compensate for fiber transmission impairments and significantly increase the transmission distance and performance of the 300-pin transponders.
Finisar has agreed to acquire the equity interests in AZNA for $19.7 million in initial consideration comprised of $2.7 million in cash and two convertible promissory notes in the principal amount of $15.6 million and $1.4 million that will be payable, at Finisar's option, in cash or in shares of Finisar common stock, with the value of such shares to be based on the trading price of the stock at the time that the shares are registered for resale (or in the case of the smaller note, when escrow conditions are satisfied).
Finisar will acquire the equity interests in Kodeos for initial consideration of approximately $7.0 million in cash. Finisar may be required to pay additional consideration of up to $2.5 million in cash to certain equity interest holders contingent on the achievement of certain financial and technical milestones. In addition, Finisar may pay up to $1 million to current Kodeos employees for achievement of certain milestones.
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