Entrepreneur takes over Avanex's French fabs

05 Mar 2007

Alexandre Krivine, an entrepreneur with past connections to Alcatel, takes over the management of Avanex's III-V semiconductor operations in Nozay, France.

Optical communications component and module vendor Avanex is to rid itself of the costly III-V semiconductor facilities in Nozay, France, that it acquired from Alcatel Optronics in 2003, with a French entrepreneur taking over control of the fabs.

On completion of the deal, which is expected by 7 May, Avanex will also hand over €13.4 million ($17.7 million) to ensure that the InP and GaAs fabs have a viable future, and continue to supply Avanex with key components such as lasers.

The California-based company, which has been working towards an outsourced, low-cost manufacturing model for some time, had found itself in a tricky spot. It could not become profitable while it owned the expensive fabs, but, equally, it needed the optoelectronic chips produced there for use in its products.

After the failure of a planned merger in late 2006 (most likely with Bookham – see related story), which could have aided profitability by increasing the utilization rates of the fabs, Avanex was left with few options but to sell up.

€13.4 million sweetener
Technically, the fab is being "bought" by Global Research Company, a French firm that is wholly owned by Alexandre Krivine – a local entrepreneur who, according to Avanex, has previous links with Alcatel, the networking giant that originally sold the Nozay fab to Avanex.

But the financial terms of the transaction actually mean that Avanex will hand over 90% equity in Avanex France, the subsidiary that owns the fab, as well as two substantial chunks of cash.

An Avanex spokesman confirmed that, on completion of the deal, €6.4 million would be transferred to ensure that the new company has a viable cash position, while a further €7 million will be made available for "past restructuring" liabilities. That way, both parties can survive, said Avanex.

Fremont-based Avanex expects to save up to $16 million in annual expenses following the deal.

Restructuring businesses and laying off employees is, as Avanex has found, a much tougher prospect in France than it is in the US.

That restructuring will now have to be taken on by Krivine, who is set to become CEO of Avanex France (the company will also be re-named after the deal is completed), and Didier Sauvage, who has been running the fabs under Avanex's control. Krivine, Sauvage and a French venture capital firm will own 90% of the company between them, while Avanex will retain a 10 % share.

Currently, the French semiconductor operation, which includes the terrestrial and submarine laser pump and fibre Bragg grating businesses, has 158 employees.

While Avanex will continue to buy lasers made at the fab, Krivine says that the new ownership will allow the company to target other customers around the world, and explore new, albeit unspecified, markets.

• In a related development, Avanex has also sold 10.8 million shares in common stock, raising approximately $20 million. The equity investment was made by UK-based hedge fund Kings Road Investments.