After a battle with Lumentum, II-VI says it is entering into a definitive agreement to acquire Coherent.
Under the terms of the transaction, Coherent shareholders will receive $220.00 in cash and 0.91 of a share of II-VI common stock for each Coherent share, valuing the deal at $7.0bn. This is up from Lumentum’s first offer of $5.7bn that saw II-VI and MKS Instruments make alternative bids. II-VI increased its offer several times and Coherent is to pay a $217.6 million termination fee to Lumentum as a result.
“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,” said Dr. Vincent D. Mattera, Chief Executive Officer of II-VI. “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.
The combination of II-VI and Coherent will increase our collective exposure to irreversible megatrends for decades to come. We are excited to welcome the talented Coherent team to II-VI and look forward to working together to deliver significant value to all stakeholders, including both companies’ shareholders, customers, employees, and business partners.” The transaction is expected to close by the end of the year and has been approved by both companies’ boards but is subject to customary closing conditions, including receipt of required regulatory approvals and approval of II-VI and Coherent shareholders.
The combined company will have revenues of $4.1bn and an available market of approximately $25bn for the complementary lasers, optics, and electronics technologies at the subsystems and systems level in aerospace and defense, life sciences, and laser-additive manufacturing. This will also accelerate growth in key industrial markets in Asia, which was an issue with the Lumentum proposal. Coherent’s service network, located in the largest manufacturing hubs in the world, will act as a distribution channel for the combined portfolio of components, including II-VI’s high-margin aftermarket consumables, as well as a channel for recurring subsystems and systems service contracts.
II-VI has set up its own silicon carbide (SiC) power division and acquired Swedish SiC wafer maker Ascatron. The company plans to finance the transaction with cash on hand, approximately $5.4 billion in fully committed debt financing from J.P. Morgan Securities LLC and a $1.5bn equity investment from Bain Capital that enables the combined company to significantly reduce the amoun it has to borrow to fund the deal.
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