24 January 2022
HSR clearance for Lumentum’s acquisition of NeoPhotonics
San Jose-based Lumentum Holdings Inc (which designs and makes photonics products for optical networks and lasers for industrial and consumer markets) has announced the expiration of the waiting period under the Hart–Scott–Rodino Antitrust Improvements Act of 1976 (HSR Act) with respect to its pending acquisition of NeoPhotonics Corp – a vertically integrated designer and manufacturer of silicon photonics and hybrid photonic integrated circuit (PIC)-based lasers, modules and subsystems for high-speed communications.
Expiration of the waiting period under the HSR Act satisfies one of the conditions to completion of the transaction contemplated by the agreement and plan of merger, announced on 3 November.
Lumentum agreed to acquire NeoPhotonics for $16 per share in cash (a total equity value of about $918m). It intends to finance the transaction through cash from the combined company’s balance sheet. Lumentum will also provide up to $50m in term loans to NeoPhotonics to fund anticipated growth, which may require increased working capital and manufacturing capacity.
The transaction has been unanimously approved by the boards of directors of both companies. Consummation remains subject to other customary closing conditions set forth in the merger agreement, including approval of NeoPhotonics’ stockholders and approval from the State Administration for Market Regulation (SAMR) of the People’s Republic of China. The transaction is expected to close in second-half 2022.
Lumentum reckons that the complementary combination of the two firms accelerates its exposure to and penetration of some of the fastest-growing areas of the more than $10bn market for optical components used in cloud and telecom network infrastructure. “The integrated company will be better positioned to serve the needs of a global customer base that is increasingly utilizing photonics to accelerate the shift to digital and virtual approaches to work and life, the proliferation of IoT, 5G and next-generation mobile networks, and the transition to advanced cloud computing architectures,” says Lumentum. “The combination creates a stronger partner for customers, with the ability and intent to invest strongly in innovation and manufacturing capacity,” it adds.
Lumentum reckons that there are significant efficiency gains to be made through the acquisition, derived from increased scale, reducing redundancies and leveraging the best capabilities in the combination. The combined firm is expected to generate more than $50m in annual run-rate synergies within 24 months of the finalizing the acquisition. The transaction is expected to be immediately accretive to combined non-GAAP earnings per share upon closing. The combined company is expected to have a solid balance sheet and strong operating cash flows, creating substantial financial flexibility to pursue continued growth initiatives.