5 January 2010


II-VI completes acquisition of Photop; updates fiscal 2010 guidance

II-VI Inc of Saxonburg, PA, USA has completed its acquisition of Photop Technologies Inc of Fuzhou, China (announced on 28 December). The initial consideration consisted of $45.6m in cash and 1,146,000 shares of II-VI common stock. The purchase agreement also provides up to $12m of additional cash earn-out opportunities based on Photop achieving certain agreed financial targets in 2010 and 2011. The final purchase price will be subject to customary closing adjustments, including working capital adjustments.

Founded in 2003 through a merger of four firms (involved in optic, laser, fiber-optic, and photonic crystal material products), Photop has more than 3000 staff (including over 350 engineers in Fuzhou, Shanghai and Guangzhou) and is a vertically integrated manufacturer of engineered materials, optical components, microchip lasers for visible display applications, and optical modules for fiber-optic communication networks as well as diverse consumer and commercial applications. Photop generated about $43m in revenues for the first nine months of 2009.

Photop is being combined with II-VI’s subsidiary VLOC Inc and Near-Infrared Optics business for financial reporting purposes. This combined group, along with the Compound Semiconductor Group, will be directed by II-VI Inc vice president Dr Vincent D. (Chuck) Mattera Jr, who has been promoted to executive VP.

II-VI Inc produces crystalline compounds including zinc selenide for infrared laser optics, silicon carbide for high-power electronic and microwave applications, and bismuth telluride for thermoelectric coolers. Business groups include:

  • Compound Semiconductor Group - II-VI’s Wide Bandgap Materials (WBG) group manufactures and markets single-crystal silicon carbide substrates for use in solid-state lighting, wireless infrastructure, RF electronics and power switching; the Marlow Industries Inc subsidiary designs and makes thermoelectric cooling and power generation solutions; and the Worldwide Materials Group (WMG) provides expertise in materials development, process development, and manufacturing scale up.
  • Near-Infrared Optics Group - VLOC makes near-infrared and visible light products for industrial, scientific, military and medical instruments and laser gain materials and products for solid-state YAG and YLF lasers.
  • Infrared Optics Group - II-VI Infrared makes optical and opto-electronic components for industrial laser and thermal imaging systems; HIGHYAG Lasertechnologie GmbH makes fiber-delivered beam transmission systems and processing tools for industrial lasers.
  • Military & Materials Group - Exotic Electro-Optics (EEO) makes infrared products for military applications; Pacific Rare Specialty Metals & Chemicals (PRM) produces and refines selenium and tellurium materials.

The Photop acquisition is expected to be neutral to II-VI’s net earnings during fiscal 2010 (ending 30 June). Photop’s positive operational results for the six months ending 30 June are expected to offset (i) acquisition-related expenses that are required to be expensed as incurred under Accounting Standards Codification Topic 805: Business Combinations (FAS 141R) and (ii) the dilutive effect of the II-VI shares used for the acquisition. The transaction is expected to be accretive in the fiscal year ending 30 June 2011.

During its fiscal second-quarter 2010 (ended 31 December 2009), II-VI incurred about $1m of transaction-related expenses, after-tax. As a result of the acquisition, for fiscal 2010 II-VI is updating its revenue guidance from $264–274m to $293–305m (while maintaining its guidance for earnings per share from continuing operations of $0.85–0.95). II-VI plans to release fiscal Q2 results on 19 January, and will update its guidance for fiscal 2010 as appropriate.

See related items:

II-VI Inc to acquire China's Photop Technologies

II-VI Inc sells eV Products to Endicott

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