24 March 2021
Lumentum raises Coherent acquisition offer again
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 which Coherent stockholders would receive $230 per share in cash and 0.6724 shares of Lumentum common stock for each Coherent share (equating to $287.50 per Coherent share, based on Lumentum’s closing stock price on 22 March, or just over $7.2bn in total).
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 a $1bn equity investment from Silver Lake (announced previously on 17 March).
To provide Coherent’s board with adequate time to evaluate it, Lumentum’s revised proposal will remain open until 11:59pm Pacific Time on 24 March.
The waiting period under the Hart-Scott-Rodino Antitrust Improvement Act in the USA that was applicable to Lumentum’s prior proposed acquisition of Coherent expired on 3 March. Subject to approval by Coherent’s and Lumentum’s stockholders, receipt of regulatory approvals in China and South Korea and other customary closing conditions, Lumentum expects the transaction to close in second-half 2021.
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), leading to a merger agreement. However, after bid rival II-VI Inc of Saxonburg, PA on 8 March made an offer equating to $260 per Coherent share (worth $6.5bn in total – deemed a ‘Company Superior Proposal’ under the terms of Coherent’s merger agreement with Lumentum), on 10 March Lumentum agreed an amended merger with Coherent, offering $261.62 per Coherent share ($6.6bn). On 12 March, II-VI made a further ‘superior’ offer equating to $272.68 per Coherent share ($6.8bn). On 17 March, Lumentum raised its offer to $220 per share in cash and 0.6100 shares of Lumentum common stock for each Coherent share (equating to $275 per Coherent share, or $6.9bn in total). On 17 March, II-VI made another ‘superior’ offer equating to $287.18 per Coherent share (about $7.2bn).
Coherent says that, in consultation with its financial and legal advisors, its board of directors will review Lumentum’s latest revised acquisition proposal in comparison to II-VI’s 17 March proposal. It adds that there can be no assurances that it will accept Lumentum’s new proposal and enter into a revised merger agreement on the proposed terms or instead terminate Coherent’s merger agreement with Lumentum in order to enter into a merger agreement with II-VI on the terms of its 17 March proposal. If Coherent terminates the definitive merger agreement with Lumentum in order to enter into an agreement with II-VI, then it would be required to pay a $217.6m termination fee to Lumentum.