News: Optoelectronics
17 March 2021
Lumentum raises Coherent acquisition offer to $6.9bn
Lumentum Holdings Inc of San Jose, CA (which designs and makes photonic products for optical networks and lasers in industrial and consumer markets) has delivered a revised proposal to acquire Coherent Inc of Santa Clara, CA (which provides lasers and laser-based technology for scientific, commercial and industrial applications) in a cash and stock transaction valued at $6.9bn.
Coherent stockholders would receive $220 per share in cash and 0.6100 shares of Lumentum common stock for each Coherent share (equating to $275 per Coherent share, using Lumentum’s closing stock price as of 16 March). As part of the revised proposal, technology investment firm Silver Lake would make a $1bn equity investment in the combined company.
Lumentum initially (on 18 January) offered $100 per share in cash and 1.1851 shares of Lumentum common stock for each Coherent share (valuing Coherent at $5.7bn). After bid rival II-VI Inc of Saxonburg, PA on 8 March made a superior offer equating to $260 per Coherent share (worth $6.5bn in total), on 10 March Lumentum raised its offer to $175 per share in cash and 1.0109 shares of Lumentum common stock for each Coherent share (equating to $261.62 per Coherent share, or $6.6bn in total). On 12 March, II-VI made a further superior offer equating to $272.68 per Coherent share (worth $6.8bn in total).
“Based on additional work, we are confident that we can meaningfully exceed our prior synergy estimates and have identified an estimated $219-244m of annual run-rate synergies,” says Lumentum’s president & CEO Alan Lowe. Silver Lake’s investment is “a compelling indicator of the power of this transformative opportunity... We look forward to combining the talented teams at Coherent and Lumentum at a time when global markets are increasingly relying on photonics products and technologies,” he adds.
“We believe strongly in the potential of the increased scale, expanded portfolio, and bolstered capabilities of the proposed combination,” says Silver Lake’s chairman & managing partner Ken Hao.
Lumentum’s board of directors continues to recommend the transaction with Coherent to its stockholders.
Transaction terms, financing, governance and approvals
Lumentum intends to finance the cash portion of the transaction through a combination of cash on hand from the combined company’s balance sheet, $3.25bn in new debt financing from a fully committed Term Loan B, and the $1bn equity investment from Silver Lake.
Silver Lake will purchase $1bn in shares of a newly designated 0% Series A Convertible Preferred Stock of Lumentum, with a purchase price of $1000 per share. The Series A Preferred will be convertible into shares of Lumentum’s common stock at a conversion price of $92.42 per share. The investment by Silver Lake is subject to customary closing conditions. Additional information regarding the investment and the Series A Preferred will be included in a Form 8-K to be filed by Lumentum with the US Securities and Exchange Commission (SEC).
Two members of Coherent’s board and one member of Silver Lake would be appointed to Lumentum’s board (expanding it to ten directors) at the closing of the transaction.
The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), expired on 3 March with respect to the proposed acquisition of Coherent. This satisfies one of the conditions to the closing of the pending transaction. The transaction is expected to close in second-half 2021, subject to approval by stockholders of both Lumentum and Coherent, receipt of remaining regulatory approvals and other customary closing conditions.
Deutsche Bank is serving as the exclusive financial advisor and sole bookrunner on the committed debt financing to Lumentum and Wilson Sonsini Goodrich & Rosati is serving as legal advisor. Simpson Thacher & Bartlett LLP is serving as legal advisor to Silver Lake in connection with its investment.
Coherent declares new II-VI acquisition proposal superior to amended Lumentum merger agreement
