Coherent surges 16% after electronic-components maker II-VI Incorporated offers $260 a share in buyout bid

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Coherent surges 16% after electronic-components maker II-VI Incorporated offers $260 a share in buyout bid
Coherent laser.Shannon Systems.
  • Coherent's stock surged on Friday amid news of another buyout offer for the company.
  • II-VI offered $260 per share for Santa Clara-based laser maker in an offer worth $6.5 billion.
  • The deal represents a 24% premium over Lumentum's previous offer and a 9.8% premium over MKS Instruments' proposal.

Coherent stock surged as much as 16% on Friday after the electronic-components maker II-VI Incorporated offered $260 per share for the company in a buyout bid.

Coherent had already been the target of multiple buyout offers prior to II-VI's proposal. First, there was a $226 per share offer from the San Jose, California-based Lumentum, and then just last week MKS Instruments offered roughly $240 per share for the company.

II-VI Incorporated's proposal represents a 24.0% premium over the implied value of the Lumentum transaction and a 9.8% premium over the implied value of MKS Instruments' acquisition proposal.

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If Coherent accepts II-VI's offer the company's stockholders would receive $130 in cash and 1.3055 II-VI common shares for each Coherent share held.

However, Coherent would also owe Lumentum a $217.6 million breakup fee if it decides to go with MKS Instruments' or II-VI's offers because it already accepted the Lumentum deal before receiving the new proposals.

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Santa Clara-based Coherent is a global supplier of industrial and fiber laser solutions for commercial, industrial, scientific, academic, and government customers. Lumentum and MKS Instruments both have similar operations.

II-VI on the other hand, makes engineered materials, optoelectronic components, and optical systems for clients in numerous industries. Dr. Vincent Mattera Jr., CEO of II-VI, said he believes the strategic combination of the Coherent and his business would produce strong results in a statement on Friday.

"The combination of II-VI and Coherent would create a uniquely strategic global leader capable of delivering to our customers the most attractive combination of photonic solutions, compound semiconductors, as well as laser technology and systems," said Dr. Vincent D. Mattera, Jr., Chief Executive Officer of II-VI.

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"We believe now is the right time to embark on this combination given significant megatrends, with burgeoning applications in both industrial and semiconductor capital equipment segments, including those that enable consumer electronics and displays," the CEO added.

II-VI Incorporated, known as "two-six", has some history with Coherent. In late December, Coherent entered into a supply agreement with II-VI for automotive welding applications and the two worked together to offer customers a single point of contact for their services.

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Coherent's board responded to the unsolicited offer from II-IV in a press release saying:

"Notwithstanding its receipt of MKS' proposal and II-VI's proposal, Coherent's board of directors continues to recommend Coherent's merger agreement with Lumentum to its stockholders. Coherent's board of directors is not modifying or withdrawing its recommendation with respect to the Lumentum merger agreement and the Lumentum merger at this time, or proposing to do so, and is not making any recommendation with respect to MKS' proposal or II-VI's proposal at this time."

Coherent's stock has more than doubled in value over the past six months including a 58% rise over just the last month amid the multiple buyout bids.

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The rise in share prices comes despite falling revenue and EPS at the company. Coherent turned in annual revenues for 2020 of just $1.23 billion, down 13% from 2019's figures, according to SEC filings. And EPS fell 50% in 2020 to just $3.00 per share from $5.92 in 2019.

Coherent traded up 14.23%, at $259.06, as of 11:57 a.m. EST on Friday.

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