Newport Corporation to acquire Spectra-Physics, the optical technologies business of Thermo Electron Corporation

Fiber Optics Weekly Update, June 4, 2004

Combination Will Create Leading Photonics Company with $400 Million in Annualized Sales

Newport Corporation announced that it has signed a definitive agreement with Thermo Electron Corporation to purchase Spectra-Physics for $300 million, subject to a post-closing net asset adjustment. Spectra-Physics represents substantially all of the optical technologies business of Thermo Electron. The purchase price is comprised of $200 million in cash, $50 million in Newport Corporation common stock, and a $50 million promissory note bearing 5 percent interest and payable in 2009. The transaction is subject to regulatory approval as well as other customary closing conditions, and is expected to close in July 2004.

The acquisition is expected to create a company with approximately $400 million in annualized sales that is immediately profitable, excluding transaction-related expenses. The company indicated that it has identified significant opportunities for product, sales, and cost synergies. Robert Deuster, Newport's chairman and chief executive officer, stated, "We expect this transaction to create many new and expanded opportunities for Newport in markets for photonics, biophotonics, and nanotechnology. With a strong balance sheet and good cash generation potential, we believe that the company will be well positioned to realize the benefits of the combination."

For the year ended December 31, 2003, Newport reported sales of $134.8 million. Its sales for the first quarter of 2004 totaled $42.4 million, an increase of approximately 27 percent compared with the $33.3 million recorded in the first quarter of 2003. Spectra-Physics had sales of approximately $200 million in 2003, and its first quarter 2004 sales were up 16 percent to approximately $58 million versus approximately $50 million in the comparable quarter of 2003.

The combined company is expected to have better geographic reach, with sales in Europe and Asia each increasing to approximately 20 percent of total sales. As a percentage of Newport's total sales in 2003, Europe represented 19 percent and Asia only 10 percent.

The combined company will have more than 2,000 employees and 15 manufacturing plants in five countries.

"We welcome the Spectra-Physics team to Newport and look forward to realizing the potential brought about by the combination of these two industry leaders. Our two companies have played a major role in the evolution of lasers and photonics over the last 35 years," said Deuster. "Through this timely combination, we will bring together decades of experience and innovation in these fields to provide customers with a single-source supplier of solutions for virtually all of their photonics needs."