Oplink Communications Inc. (Nasdaq: OPLK) today announced plans to acquire Optical Communication Products Inc. (OCP) (Nasdaq: OCPI) for $170 million. Oplink agreed to purchase a majority stake of OCP from Furukawa Electric Co. Ltd. , and has also made an offer to OCP's board to acquire the remainder of the company. (See Oplink Buys OCP Stake.)

Under the Furukawa agreement, Oplink will acquire its 58 percent share of OCP's common stock, a total of 66 million shares, for $99 million. The purchase price values OCP stock at $1.50 per share, with 85 percent payable in cash and 15 percent payable in stock. Oplink said it will pay $84.15 million in cash and 857,258 shares of its own common stock.

The transaction is subject to certain closing conditions, including antitrust review.

Oplink has also made an offer to OCP's board of directors for the remaining 42 percent, at a price of $1.50 per share. The $1.50 price represents a 9 percent premium over Friday's close.

In a conference call to announce the acquisition of Furukawa's stake, Oplink CEO Joe Liu said that the purchase of Furukawa's share was completed and that he was optimistic a deal would be reached with OCP's board on the remaining 42-percent stake.

OCP will help position Oplink to compete in the fiber-to-the-home (FTTH) and passive optical network (PON) markets. OCP's strength in those markets comes from its 2006 acquisition of GigaComm, which held a strong position in FTTH and PON components in the Japanese market. (See OCP Buys GigaComm and OCP Completes Buy.)

While cautioning that integration would not take place until Oplink acquired the remaining minority stake in OCP, Liu said that buying OCP would create a stronger, more competitive company.

The acquisition will "broaden our product portfolio and expand our potential market positioning," Liu said, noting that OCP's GPON and EPON product portfolio "gives us an entry into a rapidly growing market."

Analysts were generally upbeat about the prospects of an Oplink-OCP combination.

In a research note issued today, Needham & Co. analyst John Harmon said the deal makes "strategic sense, since it (1) broadens Oplink’s product line to include actives; (2) increases the size of the company; and (3) adds a product line in the fast-growing market for fiber-to-the-home transceivers."

"[OCP] has just begun to move [manufacturing] to China and will be able to quickly leverage Oplink's manufacturing facility in China," CIBC World Markets analyst Jeff Osbourne wrote in a research note. "We believe having in-house lasers and an active portfolio will better position Oplink."

OCP's stock closed up $0.10 (7.25%) to $1.48, while Oplink's shares closed down $0.62 (3.61%) to $16.56.

— Ryan Lawler, Reporter, Light Reading