Finisar Corporation (NASDAQ:FNSR) announced their intention to acquire Oclaro, Inc. (NASDAQ:OCLR). However, in order to acquire the fibre-optics company, Finisar will have to come up with $450 million, which they have announced that they plan to accumulate in a convertible debt offering.
However, the possibilities for acquirement does not simply stop here for Finisar. It was also declared from Investment Bank Jefferies, that another company, which goes by the name of Lumentum Holdings Inc. (NASDAQ:LITE) Holdings is a possible option for Finisar to acquire.
In terms of acquisitions, this might be the best next step for expansion on behalf of Finisar. The company has seen extraordinary stock growth over the last year, with almost 120 percent growth from $31.52 to $36.85.
Reasons behind acquisitions on behalf of Finisar
An analyst employed by Jeffries, James Kisner, stated, “We think that Oclaro is a particularly attractive target for Fisinar. Fisinar could execute such a transaction with a large portion in cash, minimizing dilution. We would expect significant operation synergies if the two companies combine.”
However, in accordance to the rumor, that another possible option for acquisition on behalf of Fisinar, Lumentum, is unlikely to happen. This is mainly, according to analysts due to the conflict in price negotiations on behalf of the acquisition.
Although Fisinar has experienced rapid growth in its stocks, due to the company converting convertible debt offering, which has a total price of $500 million, shares fell almost 4.7 percent, which leaves stock sitting at $31.17.
The reason behind the necessity of expansion
The main reason behind fiber-optic providers requiring to expand as rapidly as possible is mainly due to the increased pressure from Chinese markets. This stress is caused by an increase in demand of 100 Gigabit per second technology.
There is also a strong demand in terms of faster and more efficient interconnecting cloud computing data centers, which are packed with computer services, that require a high-speed connection to work efficiently.
Finisar stock closed at $31.17, after witnessing a decline of $1.55 or 4.74 percent.
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