UPDATE: Filtronic Buys Isotek To Re-Tap Base Station Market

30th Jul 2010 11:47

(Adds detail, analysts' comments, share price.) By Hannah Benjamin Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Electronic component maker Filtronic PLC (FTC.LN) Friday announced a re-entry in to the base station market, after agreeing to buy wireless telecommunications products company Isotek (Holdings) Ltd. in a GBP10.7 million cash and share deal. It will pay GBP4.35 million in cash for Isotek and offer 18,550,000 new Filtronic shares which, based on Thursday's closing price of 34.35 pence a share implies a total consideration of GBP10.7 million. The deal is expected to be earnings-enhancing in fiscal 2012, Filtronic said, and is expected to boost fiscal year 2012 sales by about GBP15 million. Isotek has spent GBP5 million in the last three years developing innovative filter and combiner products for use in mobile base stations which enable efficient migration to 4G networks and effective use of spectrum. Base stations communicate with mobile phones, palmtop computers and portable computers connecting a subscriber into the system. The U.K.'s major mobile operators typically operate thousands of base stations across the country, mainly in large urban areas. Filtronic exited that market in 2006 when it sold off the part of its business that made transmission filters, integrated remote radio heads and power amplifier products for use in commercial wireless infrastructure base station equipment, after the market stagnated. At that time it agreed that it wouldn't compete with its old business for three years but now wants to transform the range and size of its business and says Isotek's products offer a big competitive advantage. Nick James, an analyst at house broker Panmure Gordon, said Isotek's highly-differentiated products offer a big opportunity as operators begin to roll out fourth generation, or 4G, networks. He kept a "buy" rating on the stock and in a note to clients said it is becoming increasingly clear that there is significant pent-up demand for capacity increases from telephone companies as the exponential growth of data traffic continues. Isotek has completed trials of its products in both the U.S. and Europe which has led to initial production orders from tier one Original Equipment Manufacturers and operator customers, Filtronic said in its statement. WH Ireland Securities analyst Eric Burns said this is exactly the sort of acquisition he expected Filtronic to make. He is to review his fiscal year 2011 and 2012 forecasts following Filtronic's interim results on Monday to incorporate the acquisition, but expects "upwards implications" to his forecasts. Burns rates the stock "buy" and said at first glance the rationale behind the purchase of Isotek is sound. At 1030 GMT, Filtronic's shares were trading 1 pence, or 2.2%, lower at 34 pence, slightly underperforming a 0.5% fall in the Dow Jones U.K. Smaller Companies index. -By Hannah Benjamin, Dow Jones Newswires; 44-20-7842-9298; [email protected] (END) Dow Jones Newswires July 30, 2010 06:47 ET (10:47 GMT)