GSI-Excel acquisition progressing smoothly

BEDFORD, MA—On July 10th, GSI Group (Nasdaq symbol GSIG), supplier of technology to the medical, electronics, and industrial markets and semiconductor systems, and Excel Technology (East Setauket, NY; Nasdaq symbol XLTC), manufacturer and marketer of laser systems and optoelectronic components for research and industry, announced that they entered into a definitive agreement for GSI to acquire Excel in an all-cash transaction.

BEDFORD, MA—On July 10th, GSI Group (Nasdaq symbol GSIG), supplier of technology to the medical, electronics, and industrial markets and semiconductor systems, and Excel Technology (East Setauket, NY; Nasdaq symbol XLTC), manufacturer and marketer of laser systems and optoelectronic components for research and industry, announced that they entered into a definitive agreement for GSI to acquire Excel in an all-cash transaction. You may remember that back in early 2006, Coherent (Santa Clara, CA) attempted to acquire Excel Technology, but was blocked by the German Federal Cartel Office (FCO; Bonn, Germany); see the related comment in Laser Focus World entitled “Coherent CEO speaks out on blocked acquisition” at www.laserfocusworld.com/articles/279862. But so far, the GSI acquisition of Excel appears to be progressing smoothly.

Per the press release, GSI agreed to acquire Excel for $32 per share, or approximately $360 million, before fees and transaction costs. The offer price represents a 30.2% premium to the average Excel closing share price over the last 30 trading days prior to the announcement of the acquisition. GSI expects that the transaction will close in the 3rd quarter.

Publicly available United States Securities and Exchange Commission (SEC) filings by GSI Group on July 23rd (see www.sec.gov and click the Search for Company Filings link under the Filings & Forms ‘EDGAR’ tab) detail the Background of the Offer. In that section of the SEC filing, the board of directors of GSI Group met in October 2007 to consider the strategic rationale for a possible acquisition of Excel Technology, and in November, authorized GSI Group president and CEO Sergio Edelstein to submit to Excel a written proposal to acquire it at a price of $30 per share, with the consideration consisting of one-half GSI Group common stock and one-half cash. The letter stated that “[t]his is the same price per share that Excel’s Board previously approved in connection with the Coherent transaction.” In early December 2007, Edelstein received a call from Antoine Dominic, president and CEO of Excel Technology, advising that Excel’s board of directors would not pursue the transaction proposed in Edelstein’s letter and that minimum offer it would consider would be $35.00 per share. After several months of negotiations and many more phone calls between the parties, an early March 2008 telephone call from Dominic to Edelstein reported that Excel’s board of directors authorized him to accept an all cash price of $32.00 per share.

On June 3, 2008, GSI Group provided Excel Technology a draft of a definitive merger agreement. The negotiations related to the merger agreement focused on matters concerning, among other things, the conditions to the acceptance of shares in the offer, the ability of the parties to terminate the merger agreement, and the respective termination fees payable in certain cases upon termination of the merger agreement. On July 9, a telephonic meeting of GSI Group’s board of directors was convened in the late afternoon and Edelstein was advised by Dominic that the transaction had been approved. On July 9, 2008, the parties executed and delivered the merger agreement, and on July 10, 2008, a joint press release between GSI Group and Excel Technology announced the execution of the Merger Agreement.

“This acquisition constitutes a major step in the execution of our strategy to expand our presence in our most attractive markets,” said Sergio Edelstein. “GSI and Excel have a set of uniquely complementary products, technologies, and distribution channels, which will enable the combined company to provide customers with a significantly broader set of solutions.”

Antoine Dominic said, “By joining forces, GSI and Excel will be in a very strong position to accelerate new product introductions and global market penetration. Although Excel has performed quite well independently over the years, this combination rewards our shareholders, creates opportunities for employees and offers more solutions for our customers.”

For the twelve months ended December 31, 2007, Excel reported revenues of $160.0 million and net income of $17.7 million. For the same period, GSI Group reported revenues of $317.8 million and net income of $19.0 million.

In GSI’s second quarter earnings release on July 31st, Edelstein said, “GSI’s overall slower business levels mirror the current state of the semiconductor industry.” He added, “[The acquisition of Excel] will nearly double the revenues from our Precision Technology segment. Going forward, we expect the Precision Technology segment of our business will approach 80% of GSI’s total revenue.” —Gail Overton

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