Newport Moves to Acquire Supplier Kensington Labs
Irvine high-tech manufacturer Newport Corp., using its greatly improved stock price as currency, said Tuesday it will issue shares worth as much as $320 million to acquire one of its suppliers, Kensington Laboratories Inc.
The deal for the Richmond, Calif.-based maker of robotic equipment would be Newport’s second purchase this month and part of its plan to expand through acquisitions.
Adding Kensington should give the company newer, more complex systems to offer fiber-optics makers, analysts said. Newport’s biggest division makes systems that companies use to automate production of fiber-optic components.
The deal would give Newport, which has had an alliance with Kensington for 14 years, rights to more than 20 Kensington patents covering advanced robotics and motion control technology.
“I think it’s a good move,” said Gregory Konezny, an analyst at US Bancorp Piper Jaffray Cos. “This is consistent with their focus on gaining more sophisticated fiber-alignment systems. Kensington looks like it has some of those products.”
As for Kensington, it needed a partner with enough scale to realize its potential, Newport executives said.
“When Kensington looked at its outlook, it saw huge demand and exponential growth, but it didn’t have the infrastructure to ramp up that fast,” said Charles Cargile, Newport’s chief financial officer.
Kensington is expected to post $38 million in sales this year. Its addition will have an immediate impact on Newport’s balance sheet, adding to its earnings by 10 cents a share this year and 15 cents a share next year, Newport projects.
Newport’s customers for its systems in the fiber-optic market include JDS Uniphase Corp., Corning Inc. and Lucent Technologies Inc. Newport also supplies parts, assembly equipment and testing devices to semiconductor makers and sells research equipment to laboratories.
Newport’s fortunes have soared as others have faltered through much of the year, with investors betting on explosive demand for systems that carry heavy volumes of data online. After a 3-for-1 stock split, the value of its shares reached a high of more than $192 in late September.
Since then, it has suffered through the same swoon affecting much of the Nasdaq index. Hurt by the overall market and an analyst’s downgrade of JDS Uniphase, Newport’s stock fell $3.63 to finish at $78 a share on Tuesday.
Still, its stock has gained 411% this year, nearly twice the rate of any other publicly traded company based in Orange County.
Newport said it will issue 3.2 million to 4.1 million shares for Kensington, making the deal worth $250 million to $320 million based on Newport’s Tuesday closing price. The actual cost will be based on Newport’s average share price for the 10 days before the deal closes, which is expected to occur in the next three months.
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Times staff writer Robin Fields contributed to this report.
