Essex Corp. to buy optical products firm


September 21, 2006|By Stacey Hirsh | Stacey Hirsh,Sun reporter

Columbia technology company Essex Corp. said yesterday that it had agreed to buy Adaptive Optics Associates Inc. of Cambridge, Mass., for $40.3 million.

The cash deal is expected to close on or about Oct. 1.

Essex develops a variety of optical products, such as technology that encodes data carried by light waves and helps more data move along fiber-optic networks. It also develops a tool that can be used to help locate missiles. The majority of Essex's business is in the intelligence and defense industries.

Adaptive Optics Associates, or AOA, develops and manufactures optical equipment, from tools that correct light distortions to equipment for fiber-optic networks.

"You overnight add a significant amount of scale to the optical products business," said Myles Walton, a senior analyst at CIBC World Markets who does not own shares of Essex.

Leonard Moodispaw, president and chief executive officer of Essex, said the acquisition will bring to Essex the ability to effectively and efficiently manufacture its products.

"The AOA guys have been in the business for some years producing opto-electronic products," Moodispaw said. "It's sort of the last piece in the puzzle I've been looking for, helping us get these technologies to volume products."

The move is in line with Essex's strategy of buying in areas that it believes are growing quickly and can bring additional expertise to its customers, said Michael Lewis, a senior analyst at BB&T Capital Markets who does not own shares. BB&T does intend in the next three months to seek compensation from Essex for investment banking services.

"There appears to be some complementary businesses, and it could potentially open the door to some new customers," Lewis said of the AOA acquisition.

Lewis said AOA has NASA as a customer and is a subcontractor to Lockheed Martin Corp.

Adaptive Optics Associates, which Essex is buying from Metrologic Instruments Inc. of Blackwood, N.J., has 175 employees in Massachusetts, Connecticut and California. Those employees will not relocate because of the acquisition, Moodispaw said. Essex said it expects AOA to be profitable this year, with adjusted revenue of more than $36 million, and 85 percent of that coming from government clients.

AOA declined to comment on the acquisition.

Essex has more than 800 workers, including about 600 in the Baltimore-Washington area. The company had revenue of $159.8 million in 2005, with earnings of $8.6 million, or 38 cents per diluted share, according to filings with the Securities and Exchange Commission. Essex has forecast 2006 revenue to be between $230 million and $240 million.

Shares of Essex closed at $17.15, up 83 cents.

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