EXFO Expands Optical Line with $122 Million Acquisition of EFOS – Brief Article
A downturn in the fiber optic market has done nothing to curb a buying spree at EXFO Electro-Optical Engineering, which said it would acquire privately-held EFOS Inc. in a stock and cash deal valued at about $122 million.
EXFO, a fiber optic testing and monitoring firm, said it has struck a deal to acquire EFOS, which develops light-based technology used to assemble components, for 3.7 million EXFO shares and $25 million in cash.
The deal marks EXFO’s third purchase since it went public in June 2000.
EFOS develops high-precision products that use ultraviolet and infrared light to cure photosensitive adhesives, a critical step in the manufacturing of optical components.
Optical components boost the capacity and speed of fiber optic networks, which send information as pulses of light over strands of glass.
In November, EXFO spent $275 million in a cash and stock deal to buy Burleigh Instruments Inc., which expanded its product line with high-end equipment such as sophisticated meters to test optical wavelengths.
In February, EXFO bought automation equipment manufacturer, Vanguard Technical Solutions Inc., a small subsidiary of DT Industries Inc. Terms of the deal were not disclosed.
“It falls within our corporate strategy to target high-growth areas in the fiber optic industry,” said EXFO CEO, Germain Lamonde, in a conference call with analysts to discuss the EFOS deal.
“One of our key strategic goals is to develop automated solutions that will increase yields and reduce costs for the manufacturers of such components.”
EFOS’ technology, which includes 12 patents and 16 pending patents, cuts curing time from hours to seconds in manual, semi-automated, and automated production.
“The advantage of EFOS’ light-based cuing technology is that it produces a faster sealant and maintains more precise alignment than traditional bonding methods,” said Lamonde.
The EFOS purchase, which will be amortized as goodwill over a five-year period, is expected to close in the third quarter of 2001. The deal will be neutral in 2001 and add slightly to cash earnings in 2002.
The addition of EFOS’ operations for five months in 2001 will add $5 million to $5.5 million to EXFO revenues and $30 million for fiscal 2002.
Reflecting the acquisition, EXFO boosted its 2001 revenue forecast to $150 million to $160 million from $140 million to $150 million, while earnings per share will remain at 40 to 45 cents.
EXFO said that EFOS’ gross margins are in the range of 55 to 60 percent and the combined company will have margins of 60 to 64 percent.
Toronto-based EFOS has 100 staff and reported sales of $18 million in calendar 2000. Its customers include Nortel Networks Corp., the world’s number one supplier of fiber optic network equipment, JDS Uniphase Corp., the world’s largest supplier of fiber optic components, and Corning Inc., the world’s largest supplier of fiber optic cable.
Quebec City-based EXFO, which said both the companies have no customers representing more than six percent of sales, added that the deal will broaden its customer base.
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