Oclaro/Opnext

On March 26, 2012, Oclaro, Inc. (Nasdaq: OCLR), and Opnext, Inc. (Nasdaq: OPXT), entered into a definitive agreement to merge in an all-stock transaction. Under the terms of agreement, Opnext shareholders will receive a fixed ratio of 0.42 shares of Oclaro common stock for every share of Opnext common stock they own.

The Oclaro and Opnext merger is expected to mark a major transformation in the optical industry, bringing together over 30 years of combined telecom and datacom optical technology innovation. The merger will create a new industry leader in the fast-growing optical components and modules market, forecast to reach $9.2 billion in 2015. The broad product portfolio, technology innovation, engineering resources, cost structure and strategic customer relationships of the combined company are expected to expand its opportunities for growth and to create long-term shareholder value.

Data-intensive applications such as video and cloud computing, and the proliferation of mobile devices, are driving the need for increased performance and bandwidth throughout the core optical networks, at the heart of the world's Internet traffic. These trends are also forcing enterprises and data centers to upgrade and deploy new data communications infrastructures.

As a result, traditionally separate telecom and datacom networks are converging, leveraging advanced optical networking technologies from companies such as Opnext and Oclaro. The combined company will be well positioned to capitalize on these trends to become the No. 1 supplier to the core optical networks with a strong leadership position in the fastest-growing 40G and 100G segment, which is expected to grow at a CAGR of 42% through 2015. The broader product line resulting from the merger strengthens the combined company's position as a key supplier to existing and new customers.

Upon the close of the transaction, Opnext shareholders will own approximately 42% of the combined company.

The combined company is expected to achieve positive non-GAAP operating income in the first full quarter after the close and is expected to achieve annualized cost synergies of $35 million to $45 million within 18 months of the close of the transaction. The company expects restructuring and system integration costs to total $20 million to $30 million.

The transaction is subject to customary closing conditions, including approval by the shareholders of both companies and the receipt of regulatory approvals in the U.S., and is expected to close within three to six months.

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