Corning, NY, May 13, 2003. Corning has agreed to sell a significant portion of its photonic technologies business to Avanex Corporation in exchange for common stock currently valued at approximately $25 million. Separately, Avanex announced it would also acquire Alcatel Optronics and combine its existing business with the two acquisitions to strengthen its position as a market-leading photonics provider.
Corning said it would own 17 percent of Avanex's common stock after both transactions are completed. Corning said that the Avanex transaction would require normal regulatory approvals as well as Avanex shareholder approval. Corning's board of directors has approved the transaction, which is expected to close in the third quarter.
Wendell Weeks, Corning's president and chief operating officer, said, "We strongly believe that the transaction we are announcing today with Avanex and Alcatel Optronics will create a powerful optical components company. The optical components industry has been forced to consolidate because of the extended downturn in the telecommunications industry. Following the Corning and Alcatel Optronics acquisitions, Avanex will have the products, technologies, people and financial resources to capture new market opportunities as they arise."
Weeks added, "We have been committed to reaching a decision on the future of our Photonics Technologies business by the middle of this year. This transaction enables us to preserve the largest number of jobs possible while we continue to focus on achieving our goal of returning to profitability in 2003." He said Corning is committed to its remaining telecommunications businesses and continues to invest in extending its market-leading optical fiber, cable and hardware and equipment businesses.
"We are building on our market-leading positions in these businesses and believe we are well-positioned to grow when the telecommunications industry recovery begins," Weeks said.
Corning said that Avanex would acquire assets relating to the company's optical amplifier facility in Erwin, N.Y. and its optical components plant in Milan, Italy. Corning expects Avanex to acquire approximately 400 employees in this transaction.
The company also said it would close its Corning Lasertron facility in Bedford, Mass. by the end of this year, eliminating approximately 150 positions. Lasertron manufactures photonic components including pump lasers.
Corning said that the photonic technologies actions announced today would result in a second-quarter pretax charge of approximately $50 million to $70 million. These charges, in part, will be determined by the fair value of Avanex's common stock received by Corning at the Avanex transaction closing date. Corning said the cash impact of this transaction including restructuring charges for units not sold and a $20 million contribution to Avanex would be approximately $40 million to $50 million. The company will release further financial details on the transaction in its second quarter results in July.
James B. Flaws, Corning's vice chairman and chief financial officer, said, "The dramatic reduction in photonic technologies demand resulted in Corning undertaking significant restructuring actions over the past several years. While we have been able to reduce our losses, we continue to experience negative cash flow. This transaction is an important step in ensuring that Corning both achieves its goal of returning to profitability later this year and strengthens its financial position."
Avanex Corporation will file a proxy statement describing the transaction with the United States Securities and Exchange Commission (SEC). In addition, Avanex will file other information and documents concerning the transaction and its business with the SEC.
Investors in the common stock of Avanex are encouraged to review the proxy statement and other information to be filed with the SEC because they will contain important information. These documents will be available without charge on the SEC's web site at www.sec.gov. Investors should read the Avanex proxy statement carefully before making any voting or investment decisions.
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