Nortel will acquire a one-third stake in Bookham in return for the two firms, and will continue to source components from them in a guaranteed revenue-booster for Bookham.

But Bookham admitted that some jobs would go as it combined the new businesses with its own operations.

"We are clearly going to need to consolidate some facilities, which will involve some (job cuts)," Bookham finance chief Steve Abely said.

The two Nortel businesses have 800 employees at their UK base in Paignton, while Abingdon-based Bookham also has a workforce of 800.

Investors vote

The deal still requires the approval of Bookham shareholders, who are due to vote on 2 November.

Bookham's shares were suspended on Monday because of the scale of the acquisition, which it said was classified under listing rules as a "reverse takeover".

The company's stock closed at 47p on Friday, down sharply from a peak of £55 in July 2000.

Bookham attracted strong interest from investors that year, but its stellar stock market performance has waned sharply in line with the subsequent contraction in the telecommunications sector.

The company hit a market value of about £6.5bn ($9bn) at its peak, catapulting it into the UK's prestigious FTSE 100 share index, but it is now worth just £60m.