Applied Image Group Acquires Donnelly Optics

By: Kristin Lewotsky

Opto-imaging specialists Applied Image Group Inc. has signed an agreement with automotive-component-manufacturer Donnelly Corp. to acquire wholly-owned subsidiary Donnelly Optics in a stock-for-stock transaction. The merger is structured as an equity swap, with Donnelly surrendering 100% of its ownership in Donnelly Optics for a minority equity stake in the combined entity; further financial details were not disclosed. The deal is expected to close early in January.

According to Applied Image president and CEO Bruno Glavich, Donnelly Optics will be administered as a wholly-owned division of the company. Operationally, there will be little change—current president Daniel Joseph will continue to head the operation, and there are no plans to consolidate facilities.

The move comes as no surprise to industry observers. Specializing in plastic optical components, Donnelly Optics has been in a ramp-up phase. Earlier this year, the company suffered a significant setback Late in July, Intel Corp. canceled a major order (see Photonics Week in Review, 7/17/98), resulting in a one-time charge against earnings for the Donnelly Corp. parent company. Subsequent financial reports targeted the optics subsidiary as a problem area (see Donnelly First Quarter Sags).

Nevertheless, said Joseph, the overall situation remained positive. "The Donnelly Corp. board of directors gave us a significant amount of support all through the process," he said, though he wryly noted that the board would have liked to see significant income sooner.

Selling off the optics operation but maintaining an interest in the new parent company seems to be a good solution, according to Randy Boileau of Donnelly Corp. "We have the equity investment and we're able to maintain our link with the technology," he observed. Joseph noted that the optics company is currently working on automotive jobs for Donnelly Corp.

Applied Image produces opto-imaging products for the lighting, automotive, optical, and photonics industries. It will now be organized into four separate divisions: Imaging, Coatings, Optics, and Glasstec.