Two mergers called off

It's a new year, and change is already in the air. Two mergers first proposed in 2004 have gone belly up.

ALAMEDA, CA — It’s a new year, and change is already in the air. Two mergers first proposed in 2004 have gone belly up.

Infineon’s (Munich, Germany) decision in early January to back out of the proposed $206 million sale of its fiberoptics business to Finisar (Sunnyvale, CA) was met with mixed reactions from analysts and investors, and Finisar itself. The Infineon Management Board announced on January 11 to terminate the Amended and Restated Master Sale and Purchase Agreement with Finisar, originally announced in October 2004, citing “circumstances beyond its control.” The board said that because of delays related to the filing of the Proxy Statement with the U.S. Securities and Exchange Commission, closing could be expected no earlier than end of March 2005.

“The significant delay and high uncertainty of closing are expected to result in deterioration of our Fiber Optics business and in potential harm to our customers,” the company said in a statement. “Infineon’s Management Board has therefore decided to terminate the agreement with Finisar and will assess its legal options to recover the damages incurred by way of an arbitration proceeding in Germany.” Infineon also said that Finisar was likely to withdraw its support of the transaction.

But on January 12, Finisar issued its own statement, saying the company was not in breach of the agreement. “Prior to receiving Infineon’s notice, Finisar had advised Infineon that its Board of Directors was in the process of considering whether, in the proper exercise of its fiduciary duties, it could continue to recommend the transaction to Finisar’s stockholders in light of a number of recent adverse developments in Infineon’s fiber optics business,” the statement said. “Finisar has repeatedly assured Infineon that it is prepared to fulfill its obligations under the agreement … Finisar intends to defend itself vigorously against any legal proceedings that may be instituted by Infineon and to assert appropriate claims for recovery of damages caused by Infineon.”

Infineon said it is now looking to overhaul its fiberoptics business, which would include cutting several jobs.

Meanwhile, StockerYale (Salem, NH), designer and manufacturer of structured light lasers, light emitting diodes, fiberoptic and fluorescent illumination technologies, and specialty optical fiber and phase masks, has discontinued its efforts to acquire Navitar (Rochester, NY), a manufacturer and supplier of optical lens systems and optical solutions for the machine-vision and biomedical diagnostics industries. In addition, warrants for the purchase of 6 million shares of StockerYale common stock that were previously granted by StockerYale to The Eureka Interactive Fund Limited, an institutional investor managed by Marshall Wace, LLP, were cancelled as a result of the termination of the proposed acquisition of Navitar.

“Although we see great synergies between StockerYale and Navitar, my brother and Co-President, Julian Goldstein, and I also see many growth opportunities for Navitar as an independent organization,” said Jeremy Goldstein, Co-President of Navitar. “We have a highly efficient organization that has consistently delivered the best optical solutions for our customers. Our sales in 2004 have grown by almost 30% and our earnings have increased an average of 15% per year over the last fifteen years. We expect this growth to continue, especially in Asia and Europe, as we now add offices in China, Singapore, and Germany in addition to our current sales operations in Japan, Israel, and the UK.”

Goldstein reaffirmed the respectful relationship between Navitar and StockerYale, and his intention to keep the door open for future discussions by adding “We always stand ready to discuss business opportunities that are in the best interests of Navitar’s customers, its employees and its stockholders.”

The parties initially announced the proposed acquisition on November 9, 2004, and had signed a nonbinding letter of intent. The proposed transaction was subject, among other things, to the satisfactory completion of due diligence, the execution of a definitive purchase agreement, and the closing of a financing transaction by StockerYale.

“Although we will be open to further discussions with Navitar, we will continue to search for other acquisition candidates that would provide benefits to our customers and increase value to our shareholders,” said Mark Blodgett, chairman and CEO of StockerYale.

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