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9 July 2009


3S raises €13m as investors back French fund

3S Photonics of Nozay, France, which manufactures laser chips, optical discrete modules and passive components for telecom networks, has raised funds from France’s Strategic Investment Fund (Fonds Stratégique d’Investissement, or FSI), Alto Invest and Midi Capital.

FSI was created on the initiative of President Nicolas Sarkozy in late November amid the financial crisis, endowed with €20bn, to help stabilize small-to-medium enterprise (SME) technology and defense firms that are deemed to be strategic. In May FSI promised to invest €10m (€5m of which has already been provided). Alto Invest is now contributing an additional €2.5m, while Midi Capital, which recently purchased a shareholding in 3S, is investing €450,000 more, making almost €13m in total.

3S Photonics was founded in 1994 as Alcatel Optronics S.A. (a subsidiary of the Alcatel group) and was acquired in 2003 by Avanex Corp of Fremont, CA, USA, becoming Avanex France S.A. In April 2007, it was bought by entrepreneur Alexandre Krivine (becoming chairman & CEO) and Didier Sauvage (former director of Avanex France) and renamed 3S Photonics.

The firm designs and manufactures both active optical components (incorporating gallium arsenide and indium phosphide optoelectronic laser chips fabricated in-house at Nozay, France) as well as passive optical components based on fiber Bragg gratings, for use in discrete modules for high-speed telecom networks. 3S also provides foundry services using its related epitaxial and wafer processing capabilities.

Deep in debt in 2007, 3S has since recovered financial stability on the basis of its portfolio of existing products (optoelectronic components for long-distance submarine telecom networks, which have stringent requirements on reliability, with a 25-year guarantee). The firm has recruited 50 more staff and broadened out to new segments of the telecoms market, such as pump modules for terrestrial applications or fiber-to-the-home (FTTH). Revenue in fiscal 2007/2008 (to end June 2008) was €27.9m. The firm currently employs almost 160 staff (between the plant in Nozay and sales departments in Marcoussis, France and London, UK) and uses subcontractors in Asia (supervised by a regional office in Thailand).

To diversify from its historical submarine telecom market, in June 2008 3S acquired a significant stake in Korean firm COSET Inc, which specializes in packaging (particularly the assembly of pump modules for terrestrial applications). This initial international expansion also allowed 3S to acquire (at a relatively low cost) technologies adapted to the optics industry outside the telecom market. Due to the new funds that have been raised, 3S says that it can now repeat this sort of activity and extend its operations further (e.g. into defence, industrial lasers and, most recently, medical applications). “Rather than bow our heads and suffer the international economic crisis, we decided to take advantage of the current situation, which lends itself particularly to mergers and acquisitions,” adds Krivine. “We will seize any opportunities for external growth which appear in sectors with prospects of international consolidation.” The aim is to fully exploit the plant in Nozay, and to consolidate the firm within France.

FSI’s equity investment shows how closely 3S’s aims – to diversify through external growth - match those of fund's to support innovative SMEs in order to boost the French economy’s competitiveness. “The aim is to support the strategy of external growth into new markets for the company, a strategy that we considered coherent and promising”, says FSI’s chief operating officer Gilles Michel.

“We are very happy to welcome new shareholders... This involvement in our work is validation for our strategy, emphasising and rewarding the high-technological potential of our teams,” says 3S’ chairman & CEO Alexandre Krivine. “Since buying the company in 2007 we have managed to fulfil all the commitments and deadlines we set for ourselves. We have achieved all our growth on the basis of our own funds,” he adds. “Nowadays, in the light of the international context and although we are still unaffected by the crisis, our partners’ capital contribution is extremely opportune and will act as an accelerant to growth.” The new funds funds will enable 3S to speed up market diversification with the acquisition of shareholdings or the purchase of other firms, it adds.

The firm reckons that its resilience to the current situation is due to its position in niche markets with strong added value and in growth markets such as wavelength division multiplexing (WDM), as well as long-term projects and R&D partly funded by industrial partners.

3S says that its range of approved technologies for high-reliability applications, its staff's qualification and its state-of-the-art equipment have already secured it a place on several large-scale projects. Project 6_POD (dedicated to developing photonic integrated circuits for broadband networks, and part of the SYSTEM@TIC PARIS-REGION competitive cluster), R&D projects with the DGA (General Delegation for Ordnance), France’s EPOD (enhanced passive optical networks) project and the European counterpart ALPHA (both of which are concerned with FTTH). These constitute the basis for diversification, the firm says.

Nevertheless, in spite of the shift in projects and investments caused by the crisis, the prospects for submarine cable networks are still good, notes 3S, with market forecasts for cabling of about 50,000km for 2009, 70,000km for 2010 and 80,000km for 2011.

See related item:

France’s Strategic Investment Fund acquires €10m stake in 3S

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