II-VI Incorporated, a global leader in engineered materials and optoelectronic components, today announced it has made an offer to acquire Coherent, Inc., a global laser technology leader, in a cash and stock transaction. Under the terms of II-VI’s proposal made in a letter today (see below) to Coherent’s Board of Directors, Coherent’s shareholders would receive $130.00 in cash and 1.3055 II-VI common shares for each Coherent share.
Based on yesterday’s closing price of II-VI shares, II-VI’s proposal is valued at $260.00 per Coherent share. II-VI’s proposal represents a premium of 24.0% to the implied value of Coherent’s merger agreement with Lumentum, based on Lumentum’s closing share price yesterday, and a 9.8% premium to the implied value of MKS Instruments’ acquisition proposal based on MKS’ closing share price yesterday.
Moreover, since II-VI has substantially less product overlap with Coherent than either Lumentum or MKS, II-VI believes there is greater certainty of closing and with less potential impact to the combined value. II-VI also expects to achieve estimated, combined run-rate synergies of $200 million annually within 36 months. II-VI anticipates the transaction to be accretive to non-GAAP EPS in the second year following closing.
“The combination of II-VI and Coherent would create a uniquely strategic global leader capable of delivering to our customers the most attractive combination of photonic solutions, compound semiconductors, as well as laser technology and systems. We believe now is the right time to embark on this combination given significant megatrends, with burgeoning applications in both industrial and semiconductor capital equipment segments, including those that enable consumer electronics and displays. Moreover, II-VI expects to accelerate our growth in aerospace & defense, life sciences, and laser additive manufacturing by utilizing our compelling integrated solutions in lasers, optics, and electronics. With expanded capabilities, we expect to collaborate even more broadly across our customer base as their design-in leader of choice. In addition, with our culture of innovation and strong track record of merger integration, we expect to deliver significant value to all stakeholders, including both companies’ shareholders, customers, employees, and business partners,” said Dr. Vincent D. Mattera, Jr., Chief Executive Officer of II-VI.
Dr. Mattera continued, “We firmly believe our proposal is far superior to Coherent’s existing merger agreement with Lumentum and the recent acquisition proposal from MKS Instruments, as it is a more compelling strategic fit and would provide Coherent’s shareholders with meaningful upside opportunity. Moreover, we are confident that our transaction would have greater certainty of closing. In particular, we have not identified any competitive overlaps between Coherent’s and II-VI’s respective businesses in China. We believe we would have significant and diversified opportunities to accelerate our growth through complementary technology platforms, to increase our competitiveness by using scale across the value chain, to demonstrate deeper market intelligence and expertise, and to further diversify our businesses and revenue streams.”
II-VI intends to fund the transaction with cash on hand and debt financing led by J.P. Morgan Securities LLC. In addition, Bain Capital has expressed strong interest in a potential equity investment in the combined company. The execution of a definitive merger agreement between Coherent and II-VI would be subject to approval by each company’s Board of Directors and completion of the transaction would be subject to customary closing conditions, including receipt of required regulatory approvals and approval of II-VI and Coherent shareholders.
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