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19 January 2016

II-VI Inc acquiring EpiWorks and Anadigics for combined $110m

Engineered materials and optoelectronic component maker II-VI Inc of Saxonburg, PA, USA has signed agreements to acquire two businesses - EpiWorks Inc and Anadigics Inc - that will expand its technology platforms and production capacity for semiconductor lasers with a scalable 6-inch epitaxial growth and wafer fabrication platform, positioning it to serve fast-growing markets addressed by vertical-cavity surface-emitting lasers (VCSELs). The firm says that VCSELs provide unique advantages in applications in consumer electronics, data centers, sensing, medical and industrial markets, and are expected to grow at greater than 20% annually.

EpiWorks Inc of Champaign-Urbana, IL, USA (which manufactures epitaxial wafers for optical components, wireless devices and high-speed communication applications) is described as conducting "high-volume epitaxial growth of compound semiconductor wafers for electronic and photonic device applications". Revenue in 2015 was about $14m. Its 25,000ft2, Class 1000 cleanroom epi foundry should provide significant expansion of II-VI's product portfolio. EpiWorks' expertise is reckoned to dovetail with II-VI's core competencies as an engineered materials company.

"Demand for high-performance semiconductor solutions used in communications, data-center, cloud and advanced sensor applications continues to increase," says David Ahmari, who will remain responsible for EpiWorks' sales, marketing & technology. "EpiWorks has been adding capacity to address market growth and emerging photonics applications, however demand forecasts outpace our ability to add capacity organically. By merging with II-VI, EpiWorks has access to substantial expansion capital, a global footprint and sales support around the world. This will allow us to rapidly deploy our technology to the market and increase our market penetration," he adds. "Our goal is to provide our customers the most complete range of semiconductor solutions in the industry along with global scale. Teaming with II-VI allows us to go beyond the typical epiwafer foundry model by offering not just scale but a level of sophistication, flexibility and capability needed in our industry as it is scaling and evolving."

EpiWorks will operate as the separate division II-VI EpiWorks. II-VI plans to expand production in Illinois. Access to metal-organic chemical vapor deposition (MOCVD) capacity at other II-VI sites also offers EpiWorks' customers additional capacity, flexibility and redundancy, it is reckoned.

"We have a creative, multi-year plan for capacity, new capabilities and novel products that cover a wide range of industries and markets," notes EpiWorks' CEO Quesnell Hartmann, who will continue as general manager of the EpiWorks business unit. "The vision is to drive the semiconductor technology roadmap by offering a broad-based platform that can serve the diverse needs of today's semiconductor devices and applications. Not only will we target next-generation performance, but we will use new technology and methods to aggressively reduce costs in high-volume products," he adds. "Our industry is at a crossroads, and those who can innovate and scale will certainly build a sustained advantage. By joining with II-VI, we have the resources and capability to make this vision a reality."

Broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA is described as a "high-volume foundry unmatched in the production of 6-inch gallium arsenide (GaAs) wafers". The acquisition adds capacity more quickly and economically than building it from new, notes II-VI, which believes that controlling a scalable infrastructure is critical for extending its Laser Enterprise product portfolio technology and positioning II-VI as the world leader in VCSEL technology. As of 3 October 2015, Anadigics had year-to-date (nine months) revenue of $46m and net assets of about $28m.

II-VI agreed to acquire Anadigics for $0.66 per share net in cash (an increase of $0.31 per share over the 11 November deal for affiliates of GaAs Labs LLC to acquire Anadigics for $0.35 per share). On 12 January, Anadigics announced that the $0.66 per-share offer from II-VI had been determined by its board of directors to constitute a 'superior offer'. GaAs Labs subsequently declined to submit a further amended acquisition proposal. On 15 January, in accordance with the terms of the II-VI merger agreement, the termination fee that was owed by Anadigics to GaAs Labs under the GaAs Labs merger agreement was paid to GaAs Labs by II-VI.

"VCSELs address the need for increasingly intelligent human-machine interfaces such as gesture recognition in consumer electronics products as well as the growing demand for short-reach high-speed optical connectivity in data centers worldwide," comments II-VI's chairman & CEO Francis J. Kramer. "Our engagement with key customers in these and other markets has been sufficiently compelling to lead us to believe that this investment is needed now."

The acquisition of EpiWorks is valued at $43m in cash (due at closing) plus a $6m earn out. The acquisition of Anadigics is valued at $61m in cash due at closing. The combined value of the acquisitions together is $110m in cash (financed from available cash and borrowings under II-VI's credit facility). Both acquisitions are expected to close within 60 days. On a non-GAAP basis, II-VI expects the transactions to be accretive to continuing operations from second-half 2017. For the quarters preceding that, the transaction is expected to be dilutive due to investment in the 6" platform. II-VI will provide an update on the financial expectations when the transactions close.

The EpiWorks transaction is subject to the approval of its shareholders. The holders of shares representing 83% of the votes have already signed support agreements to vote in favor of the acquisition.

For the Anadigics transaction, a tender offer for all outstanding common stock must begin within 10 business days and remain open for at least 20 business days. A majority of the outstanding shares must be tendered to complete the acquisition. One-time expenses of up to $10m ($0.15/share) may be incurred over the next four quarters to fully integrate core operations into II-VI's Laser Solutions Segment. Following closing, II-VI aims to move rapidly to serve customers, integrate key operations and reduce operating losses.

II-VI is updating its guidance for fiscal second-quarter (ended 31 December 2015) to revenue of $189-191m and earnings per sare (EPS) of $0.28-0.30 (including the extension of the R&D tax credit). The firm further expects to continue its share repurchases after it reports its results for the quarter to end-December 2015.

See related items:

EpiWorks to manufacture epiwafers for POET's monolithic optoelectronics process platform

POET enters into VCSEL manufacturing services agreement with Anadigics

Anadigics receives 'superior offer' of $0.66 per share after GaAs Labs matches competing bidder's $0.62

GaAs Labs extends tender offer for Anadigics further to 25 January

Anadigics receives 'superior offer' of $0.62 per share after GaAs Labs matches competing bidder's $0.58

Anadigics receives 'superior offer' of $0.58 per share after GaAs Labs matches competing bidder's $0.54

GaAs Labs announces extension of tender offer for Anadigics

Anadigics receives 'superior offer' of $0.54 per share after GaAs Labs matches competing bidder's $0.48

Anadigics declares new acquisition offer of $0.48 per share superior to GaAs Labs

Anadigics receives alternative acquisition proposals following GaAs Labs deal

Anadigics agrees to be acquired by GaAs Labs for $32m

Tags: II-VI Inc Anadigics Gaas Labs Gaas Labs EpiWorks Epitaxial wafers

Visit: www.ii-vi-photonics.com

Visit: www.epiworks.com

Visit: www.anadigics.com

Visit: www.gaaslabs.net

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