The German venture capital company, DEWB AG is to buy Swiss investment firm, "optic - optical technology investments".
Zurich-based optic has seen its share price has fall below the company's net asset value.
Optic went public on the Swiss Stock Exchange in May 2000. It has been struggling for months with its share price lower than its Net Asset Value and poor liquidity.
Now it is to be acquired by DEWB (Deutsche Effecten- und Wechsel-Beteiligungsgesellschaft), an established venture capital investment firm with a market capitalisation of €95 million (end of September) majority owned by Jenoptik AG and its employee pension fund.
The choice faced by the company's board and shareholders was either to sell to the best and highest bidder or liquidate, according to Antonio Oro of IDEA Consulting, the asset management company that controlled optic, and member of the optic board.
Oro says that the mistake was to trade as a Swiss investment company because regulation required that two thirds of capital raised at the IPO be invested within a short period of time after the floatation.
The company, which is comparable to a closed-end fund in the US, paid a premium in 2000 for shares in public companies, such as Cree and Applied Materials in the US, ASML in Netherlands, Jenoptik, Aixtron, and Osram in Germany.
Shares in its portfolio companies subsequently plunged in value, along with most all publicly traded technology firms. The idea had been to invest in public firms and then sell off the shares over time, using the profit to invest in the growing number of viable US and European privately owned firms in the optical sector.
"It would have been smarter to make a limited partnership," says Oro. "But then that would not have kept the shares liquid and we wanted to have a highly liquid optics industry share."
Oro says the merging of the two firms is a good match. DEWB is one of the few venture capital funds worldwide that specialises only in optical ventures and it has been successful to date. It was profitable in 2001 and "quite likely" to be profitable again in 2002. This deal allows each optic shareholder to acquire 2.37 DEWB shares per optic share.
Optics is an enabling technology. Scientists and engineers are rapidly figuring out how to harness light and mass manufacture devices for a myriad of purposes, from surgical instrumentation that dispenses with the need to slice patients open for operations, to traffic lights that emit visible light even when the setting sun's rays are bouncing off its surface.
There was a boom and bust in investing in telecommunications optical companies. But the bubble was limited pretty much to fiber optic companies, not medical and industrial optics, points out Oro.
"A lot of investors now understand that optics is huge - way beyond telecoms. Optical devices are everywhere - in lasers used for hair removal and plastic surgery, in endoscopy tools, flat screen displays, and LEDs," says Oro. "They might not be ready to invest yet, but the knowledge is there."
Swiss investment firm acquired by German venture capital company.
Both publicly traded.
Transaction based on one optic ag share for 2.37 DEWB shares
Optical industry still attractive in the long term but investors reluctant.