Kymata Sold for $119 Million

Alcatel Optronics (Nasdaq: ALAO; Paris: CGO.PA) this morning announced an agreement to acquire Kymata Ltd., a Scottish startup developing arrayed waveguide gratings (AWGs), for Alcatel stock worth $119 million (see Alcatel to Acquire Kymata ).

The deal was received positively on the Paris bourse, where Alcatel’s Class O shares rose 1.95 percent, to €10.45 (US$9.14) in the first couple of hours of trading, beating the CAC 40 index, which rose 0.71 percent over the same period. Alcatel Class A shares were also up 0.90 percent on Friday’s close, at €19.07 ($16.69).

As reported in Light Reading (see Kymata: For Sale?), rumors of a possible acquisition of Kymata by Alcatel have been doing the rounds for several months, during which time the putative price has dropped from several hundred million dollars to a range of £100 to £150 million ($140-210 million) in the past couple of weeks.

The actual value of the deal is even lower. Alcatel is handing over 9 million Class O shares and 2.2 million Class A shares, which this morning were worth a total of €136 million ($119 million). The transaction is subject to conditions and is expected to close "by the end of August."

Last Tuesday, Kymata appeared to be paving the way for a sale at that sort of price when it won approval for a change in the company’s articles of association in an extraordinary general meeting of its shareholders (see What's Cooking at Kymata ?). The changes ensured that Kymata's current employees would get something out of the deal even if the price was low. Former employees -- notably former CEO Brendan Hyland -- and some private shareholders appeared to lose out in a big way.

Alcatel is widely regarded as a leader in some aspects of optoelectronics, so its acquisition of Kymata is significant. It suggests that the company may have some decent AWG technology and that AWGs in general have a promising future, contrary to some of the comments on Light Reading's message boards following our previous story (see "Preparing to Party at Kymata" for instance). On the other hand, Alcatel has had a mixed record of success with previous acquisitions (see our interview with Bernard Daines, for instance).

In Alcatel Optronics’ press release, CEO Jean-Christophe Giroux says Kymata is a “perfect match” with his company, and that the acquisition “will allow us to gain at least two years in time-to-market for planar products.” It’s a “crucial step” towards Alcatel’s goal of becoming a major player in the integration of active and passive optical components. Alcatel's strength is in active components, while Kymata's AWGs are passive.

Kymata last week said it was having considerable success in winning new business and ramping up its revenues. It will be interesting to see whether its acquisition will frighten off some of its customers, many of which are in direct competition with Alcatel.

— Peter Heywood, Founding Editor, Light Reading
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KPSmells 12/4/2012 | 8:01:13 PM
re: Kymata Sold for $119 Million This clearly proves that if VCs screw with the founders and management teams and their company, then you can never win.

In this deal, the so called top notch VC's (these are people who market themselves in the front cover pages of Fortune, Forbes, Wall Street Journal etc...) lead this company to a complete disaster by messing with the company management.
Milano 12/4/2012 | 8:01:11 PM
re: Kymata Sold for $119 Million It looks like they will have half a party at Kymata, since they sold for about half of the rumoured price.

The most significant aspect of this transaction in my opinion is that there is no future for single-technology, independent passive component vendors. They will need to find a home under one of the giant umbrellas like JDS, Corning or Alcatel Optronics. These integrated components vendors will try to complete their portfolio in the coming months by buying good quality companies at reduced price.

Everybody loves to shop at Wall Mart. You find everything at a cheap price. Buyers go to the boutique if they need a specialty product. And AWG (as well as thin film, Bragg, etc.) is closer to bananas than to Belgium chocolate.

realoptics 12/4/2012 | 8:01:10 PM
re: Kymata Sold for $119 Million Agree with KPsmells, those suckeres invested over last 2 years into Kymata $169 millions, sold the company for $119 millions-they do not deserve more anyway.

I would say Kymata as a company is one of the lucky huys, wait longer we will see more Nanovision type of companies. Last yera is simply too much hype over AWGs.

gsenechal 12/4/2012 | 8:01:06 PM
re: Kymata Sold for $119 Million A brief explanation of AWG would be useful for me. I understand FBGratings.

Can anyone explain AWG in 20 words or less?

Thx - G
lite_me 12/4/2012 | 8:01:04 PM
re: Kymata Sold for $119 Million 7/25/2001: Nokia Buying Amber for $421m
7/27/01: Cisco to Acquire Allegro for $181m
7/30/01: Kymata Sold to Alcatel for $119m
7/31/01: Motorola to buy RiverDelta for $300m

Who is next?

I heard that an Acton, MA based telecom startup is in buyout negotiations. Anybody else heard that?
netskeptic 12/4/2012 | 8:01:03 PM
re: Kymata Sold for $119 Million
> I heard that an Acton, MA based telecom startup
> is in buyout negotiations. Anybody else heard
> that?

Below is a list of all start-ups in Acton:

Appian Communications
Equipe Communications
Gotham Networks
Indus River Networks
Pirus Networks
Tenor Networks
WaveSmith Networks

Data from http://www.convergedigest.com/...

My skeptical guess is that there are early warnings that MPLS is not going to deliver on its promise, hence there is going to be an ATM revival and hence the most probable candidates are WaveSmith and Equipe.

Again, this is a pure unsubstantiated speculation.



Pauline Rigby 12/4/2012 | 8:01:03 PM
re: Kymata Sold for $119 Million See Light Reading's beginners guide at http://www.lightreading.com/do...

(It's more than 20 words, but I hope it helps)

[email protected]
_____ 12/4/2012 | 8:01:02 PM
re: Kymata Sold for $119 Million Indus river was bought by Cabletron (Enterasys) last year.

Appian and Tenor have been at the dance for a LONG time now and have not been asked to dance yet. No customers + No sales = No future in this market.
_____ 12/4/2012 | 8:01:02 PM
re: Kymata Sold for $119 Million Any rumor on who the Acton start up is?
One guess would be Gotham- they seem to be in a bit of trouble and a buyout would seem like a welcome exit strategy. Any idea what each Riverdelta shareholder would get ($) per share?
reoptic 12/4/2012 | 8:00:59 PM
re: Kymata Sold for $119 Million $3
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