Is optical components giant Finisar about to make a play for Oclaro?
That's a likely option once Finisar has raised $500 million from a convertible notes issue just announced by the vendor, according to the analyst team at Jefferies.
Finisar Corp. (Nasdaq: FNSR) says some of the $500 million ("upsized" from an initial $450 million offer unveiled only yesterday) may be used to "acquire complementary businesses, products or technologies." James Kisner, senior vice president of IT Hardware & Communications Infrastructure Equity Research at Jefferies & Co. Inc. , stated in a research note issued early Friday that "Oclaro is one of the more likely potential acquisition targets [for Finisar] given significant opex savings potential, incremental capabilities in long haul optics, and an EV [evaluation] that doesn't put it out of reach."
Oclaro Inc. (Nasdaq: OCLR), which has gained 4% Friday morning to trade at $8.97, currently carries a market valuation of almost $1.5 billion.
Finisar investors seem less keen on the potential for significant M&A, as its share price has dipped 3.5% to $31.58 in early Friday trading.
Yet significant M&A is exactly what the sector and its financial followers have been expecting. Finisar was previously linked in mid- late-2015 to a probable bid for Lumentum Holdings Inc. , once that was spun out of the former JDSU, but that move never materialized, with Lumentum instead positioning itself as a possible acquirer. (See Lumentum Looks to Be a Buyer.)
The Jefferies team believes the asking price, and disagreements about who might manage a combined company, kept the Finisar/Lumentum deal from happening. Since then, Lumentum's share price has shot up -- it has doubled during 2016 and now stands at $41.00, giving it a market value of about $2.5 billion.
Oclaro, though, is affordable and "is a particularly attractive target" for Finisar, notes Kisner, as Oclaro has "robust capabilities in long haul optics, including discretes, an area in which FNSR has had little market presence historically." (See Oclaro's Positive Momentum Continues.)
There's something for the Valley's optical community to talk about as they head for their end-of-week drinks…
— Ray Le Maistre, , Editor-in-Chief, Light Reading