However, just ahead of the deal, Prelude Trust plc announced a £613,000 (about $1 million) investment in Polatis (Cambridge, England) that will give Prelude a 19.7 percent stake in the combined group.

The merger, described as a combination of “two, equally strong and successful companies” is expected to close August 15.

The companies say they will contribute intellectual property and technology, products, people, and their existing customer base into the merged entity, which has yet to be named.

They also say each would contribute “significant cash toward the new company.” In addition, investors from the existing investment team will contribute new capital to the combined entity.

Continuum Photonics ( Billerica, MA) was founded in 1998 and offers a family of optical switches based on its patented DirectLight switching technology. This provides integrated switching, optical attenuation (gain equalization), and power, and is targeted at the Optical Automation Systems (OAS) market, with customers in carrier labs, data equipment providers and telecom equipment manufacturers.

Continuum has products in development for telecommunication network and network monitoring applications.

The company’s investors include Flagship Ventures, Prism Venture Partners, JK&B Capital, Boston Millennia Partners, Harris and Harris Group, GE Capital, MTDC, Arcadian Venture Partners, and Gainesborough Investments.

Polatis, founded two years later, specializes on products based on its Micro-Actuation and Sensing System (MASS) platform, including a range of optical switch systems, modules, and cards for both single mode and multimode fibre applications. It sells mainly to communications, aerospace and defense customers.

In March 2005, Polatis announced a worldwide sales distribution agreement with JDS Uniphase. In addition to Prelude, the British group is backed by 3i, Alta Berkeley and EonTech.

While both offer optical switches utilizing patented, beam-steering technology capable of sub-1 dB insertion loss switches across a highly transparent switch fabric, the companies stress these are differentiated products serving different classes of customers, and thus there is little overlap.

The combined group “will continue the tradition of high quality switching, while evolving toward a new class of device – a Layer 1 optical device with new levels of functionality integrated directly into the core platform.”

Both stress the combined operation will continue to support products in the field.

The new company will be incorporated in the State of Delaware, in the U.S., and will continue to maintain operations in both the UK and U.S. Over time, the new group expects to expand operations and sales offices in other locations as needed.