The merger, announced Monday afternoon, is a stock swap of 0.42 Oclaro shares for each Opnext share. Based on Opnext's Monday closing price of $1.13, that makes the deal worth about $176 million, compared with Opnext's current market capitalization of $102 million.
Oclaro shareholders would own 58 percent of the combined company and would hold six of its 10 board seats. CEOs of both sides -- Alain Couder of Oclaro and Henry Bosco of Opnext -- would be on the board, with Couder remaining chairman and CEO of the combined company.
Opnext shares rose 64 cents (57 percent) to $1.77 in early after-hours trading, while Oclaro shares were unchanged after-hours at press time.
Why this matters
Wasn't it just weeks ago that someone was complaining about consolidation never happening in this sector?
Most people in optical networking think there's too much supply on the optical components side. It weakens the negotiating power of companies like Oclaro and Opnext, keeping margins at bare-survival levels.
Theoretically, this deal would help, boosting Oclaro's competitive stance against Finisar Corp. (Nasdaq: FNSR) and JDSU (Nasdaq: JDSU; Toronto: JDU). But Oclaro and Opnext say their product lines hardly overlap -- which would suggest the deal won't take much supply out of the industry.
To indicate a few differences between the two: At 40Gbit/s and 100Gbit/s, Opnext has focused more on client-side, short-reach transceiver modules, while Oclaro has been working on line-side modules. Oclaro also has reconfigurable optical add/drop multiplexer (ROADM) and amplifier product lines that Opnext lacks.
- Top Ten: Optical Networking Movers & Shakers
- Still Waiting for Optical Consolidation
- Optical Industry Adjusting After Thai Floods
— Craig Matsumoto, Managing Editor, Light Reading