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Electronics Production | January 28, 2009

Bookham and Avanex agree on merger

Bookham and Avanex reached a definitive agreement to merge in an all-stock transaction. Avanex shareholders will receive 5.426 shares of Bookham common stock for every share of Avanex common stock and will own approximately 46.75% of the combined company.
It is expected that the combination will be Adjusted EBITDA accretive in the first full quarter after the close of the transaction and will generate $7 million of quarterly cost savings by the end of the fourth full quarter after the close. The new company will have a stronger balance sheet, benefiting from combined cash balances and no outstanding debt. Restructuring costs associated with the transaction are expected to be less than $7 million.

"The combination of Bookham and Avanex creates synergies that we expect will significantly improve financial performance faster than either of the two companies could accomplish on a stand-alone basis," said Alain Couder, president and CEO of Bookham. "There is minimal product overlap between our businesses allowing us to quickly expand sales opportunities and improve service to our customers. In addition, both companies have strong technology platforms and the best engineering teams that we expect will allow us to drive innovation and expansion for both existing and new growth areas."

"The significant financial and technological advantages to combining the two companies will benefit our customers, employees, and shareholders, as well as the industry as a whole," said Giovanni Barbarossa, President and CEO of Avanex. "We expect that the combination of Avanex's next generation subsystem design and integration capabilities, enhanced with additional internal content from Bookham will deliver end-to-end product offerings to our customers at competitive prices."

The combined company will be led by Alain Couder who will serve as President and CEO. The company is expected to have two telecom divisions and one non-telecom division. The board of directors will be composed of Alain Couder and three additional directors from the Bookham board, and Giovanni Barbarossa and two additional directors from the Avanex board.

Transaction Details
Under the terms of the agreement signed on January 27, 2009, which has been approved by both boards of directors, Avanex shareholders will receive, at a fixed exchange ratio, 5.426 shares of Bookham common stock for every share of Avanex common stock. Upon the close of the transaction, Avanex shareholders will own approximately 46.75 percent of the combined company. Based on the closing price of Bookham on January 26, 2009 the total consideration to Avanex shareholders would be equivalent to $35.4 million or $2.17 per share.

The merger is subject to customary closing conditions including shareholder approval by both companies. Both companies will continue to operate their businesses independently until the close of the merger. The merger is expected to be completed within three to six months.
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