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25 March 2021

Coherent accepts II-VI acquisition proposal

After consultation with its financial and legal advisors, Coherent Inc of Santa Clara, CA (which provides lasers and laser-based technology for scientific, commercial and industrial applications) has determined that the acquisition proposal received on 17 March from engineered materials and optoelectronic component maker II-VI Inc of Saxonburg, PA, USA continues to be a ‘Company Superior Proposal’ under Coherent’s 9 March merger agreement with Lumentum Holdings Inc of San Jose, CA (which designs and makes photonic products for optical networks and lasers in industrial and consumer markets) after considering the revised acquisition proposal received from Lumentum on 22 March.

Coherent says that its board of directors evaluated the comparative benefits and risks of the II-VI and Lumentum proposals, including the near-term and long-term financial opportunities and risks presented by each proposal, the potential synergies available through a combination with each company, and the complementary businesses of each company.

Subject to approval by the stockholders of Coherent and II-VI, receipt of US and foreign regulatory approvals and other customary closing conditions, each share of Coherent common stock will be exchanged for $220 in cash and 0.91 shares of II-VI (when the transaction is expected to close in fourth-quarter 2021).

Accordingly, Coherent is terminating the amended 9 March merger agreement with Lumentum by paying it the agreed $217.6m termination fee.

Lumentum notes that, using the closing share prices as of 24 March, its offer (of $230 in cash and 0.6724 shares of Lumentum stock for each Coherent share) equated to $283.12 per share, versus II–VI’s offer (of $220 in cash and 0.91 shares of II-VI for each Coherent share) equating to $281.21 per share.

“We are pleased to have reached an agreement with Coherent to create a global leader in photonic solutions, compound semiconductors and laser technology and systems,” says II-VI’s CEO Dr Vincent D. Mattera Jr. “Together, we will have significant opportunities to accelerate our growth through complementary technology platforms, strengthen our competitiveness by using our combined scale across the value chain, benefit from deeper market intelligence and expertise, and further diversify our businesses by end market and geography. Moreover, the combination of II-VI and Coherent will increase our collective exposure to irreversible megatrends for decades to come,” he adds.

II-VI reckons that, together, the two firms’ combined annual revenue will be about $4.1bn, leveraging technology platforms operating at scale to address a combined available market of about $25bn. Complementary laser, optics and electronics technologies at the subsystems and systems level should enable solutions to accelerate growth in aerospace & defense, life sciences and laser-additive manufacturing, while driving margin expansion and profitability, the firm adds. In addition, a highly complementary geographic presence should enable it to accelerate growth in key industrial markets in Asia.

The combined company is expected to achieve $250m in annual cost synergies within 36 months of completion of the merger, which is expected to be accretive to II-VI’s non-GAAP earnings per share in the second year following close.

II-VI plans to finance the transaction with cash on hand, about $5.4bn in fully committed debt financing from J.P. Morgan Securities LLC and an equity investment from Bain Capital, which has committed $1.5bn in the combined company at a conversion price of $85 per share and has confirmed that it is willing to increase this by at least $300m of an additional $650m optional amount on the same terms, for a total commitment of at least $1.8bn. The Bain Capital investment will enable II-VI to significantly reduce leverage. Bain Capital’s co-chairman Steve Pagliuca is expected to join the II-VI board. Two current Coherent directors are also expected to join the II-VI board upon closing.

II-VI’s management team has “outstanding operational experience and a strong M&A track record,” comments Pagliuca. “The combination of II-VI and Coherent will create a leading platform in the photonics industry.”

See related items:

II-VI maintains current offer for Coherent superior to Lumentum’s

Lumentum to acquire Coherent for $5.7bn

Tags: Laser diodes

Visit: www.Coherent.com

Visit: www.ii-vi.com

Visit: www.lumentum.com

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