On 1 July 2022, after a year-and-a-half saga that included a protracted bidding war and a long review by antitrust regulators, the global materials, photonics and optoelectronics company II–VI Inc. finally completed its US$6.56 billion acquisition of the laser manufacturer Coherent.
In a press release accompanying the announcement of the deal’s completion, the II–VI chair, Vincent D. Mattera, Jr., noted that under the integration plan, the new combined company would be called Coherent—a nod, Mattera said, not only to the term’s association with laser light, but also to its “broader meaning” of “bringing things together.” The launch date for the combined firm’s new brand identity would be announced soon, according to Mattera.
Strengthening the value chain
The release characterized the combined firm’s rationale in terms of its participation across the photonics value chain. “II–VI’s scale, at the levels of the value chain where expertise in materials matters, is complementary to Coherent’s scale where laser systems play,” according to the press release. “The combined company will leverage that complementary scale in ways that will really matter to our customers in strategic markets.”
More specifically, the combined company will target four segments—industrial, communications, electronics and instrumentation—that it said “represent a fast-growing total addressable market of $65 billion.” In framing the company’s destiny, Mattera cited a list of hot-button areas, saying the combination of II–VI and Coherent would “enable the next evolution of the cloud, 3D sensing, electric vehicles, additive manufacturing, the commercialization of space, and the personalization of health care, just to name a few.”
Lengthy saga
The saga that culminated in 1 July 2022 announcement began in mid-January 2021, when another giant photonics firm, Lumentum, announced that it intended to acquire Coherent in a deal valued at US$5.7 billion. Under the terms of the envisioned deal, Coherent investors would receive US$100 and 1.1851 shares of Lumentum stock for each Coherent share owned.
Less than a month later, however, two other firms, MKS Instruments and II–VI, had jumped in with competing, richer offers of their own for Coherent. An additional month and a half saw the deal value steadily ratchet up to II–VI’s ultimately successful bid, accepted by Coherent on 25 March 2021.
In that sweetened bid, each common share of Coherent will be exchanged for US$220 cash plus 0.91 shares of II–VI common stock. At the time of the initial March 2021 agreement, based on the II–VI stock price, the deal had a total value of more than US$7 billion. With recent declines in worldwide equity prices, however, the nominal value at the market’s close on 1 July 2022 came in at US$6.56 billion.
Regulatory foot-dragging
While in mid-May 2021 the companies said that they expected the merger to be completed by year-end 2021, and while the two firms had both secured shareholder approval by June 2021, the transaction became mired down in approvals by several international antitrust regulators. The most notable foot-dragger was China’s State Administration for Market Regulation (SAMR), delayed approval by which had also slowed completion of II–VI’s previous mega-acquisition of Finisar.
SAMR did not provide antitrust clearance of the Coherent transaction until 28 June 2022, almost exactly a year after shareholder approval of the deal. With that hurdle cleared, the companies moved quickly to announce the completed deal on 1 July.
The deal is reportedly being financed through more than US$5.0 billion in debt financing, principally by J.P. Morgan, and convertible preferred equity of US$1.8 billion or more from Bain Capital. The firm will trade under the symbol COHR on the NASDAQ exchange, with the date of re-listing still to be announced.