Optical network component developer Xtellus Inc. has been acquired by Oclaro Inc. (Nasdaq: OCLR) at a company value of $250 million. Xtellus shareholders will receive $33 million in Oclaro shares, some of which will be held in escrow for 18 months to support Xtellus' indemnification obligations to Oclaro. Potential additional payment will depend on milestones.

Xtellus chief scientist Dr. Yaron Silberberg and COO Dr. Gil Cohen founded the company in 2000. Headquartered in New Jersey, the company has had a Jerusalem R&D center for years, along with a fab in South Korea. Dr. Krishna Bala was appointed president and CEO two years ago.

Xtellus raised $30 million since it was founded. Investors include Israel Seed Partners, Alta Berkeley, AIG-Orion, NanoDimension AG, Myriad Partners, and Kreos Capital.

Oclaro is due to keep Xtellus's Jerusalem R&D center, which employs 15 of the company's 45 employees. Bala says that the interest in Israel is not only because of the R&D center, but because of future plans about activity in Israel in general.

Bala said, "One of the first things we did in the negotiations was to organize a visit by Oclaro executives to Israel. The conduct of the Israeli employees was very interesting for the executives and they want to increase activity here, as well as seek more acquisitions in Israel."

The acquisition agreement includes a plan for keeping some Xtellus employees, who will receive up to $5 million in cash and shares. According to IVC Online, Xtellus had $15 million in sales in 2008, and was on the verge of profitability. If it contributes $17 million to Oclaro in 2010, Xtellus's shareholders will receive an additional $7 million cash payment.

Published by Globes [online], Israel business news - www.globes-online.com - on December 20, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009