Lumentum announced an agreement to acquire photonics and lasers group Coherent for USD 5.7 billion in cash and shares. The deal expands its portfolio beyond the core telecom business to target new industries such as microelectronics, precision manufacturing, instrumentation, and the aerospace and defense markets.
The agreed price is worth USD 100 cash and 1.1851 shares of Lumentum common stock for each Coherent share, equal to a 49 percent premium on Coherent's share price 15 January. This will give Coherent stockholders 27 percent of the combined company, and they will have two seats on the expanded nine-member board.
Lumentum said the companies would benefit from increased scale and R&D power, allowing them to better serve a growing customer base for photonics and laser applications. The merger also creates a more diversified customer base and product offering.
The combined company is expected to generate more than USD 150 million in annual run-rate synergies within 24 months of the merger closing. Lumentum said the deal would add to adjusted earnings per share during the first full year after closing. It is financing the deal with cash on hand and USD 2.1 billion in loans and said it expects to have sufficient financial flexibility after the takeover to continue with its growth initiatives.
The takeover is expected to close in the second half of this year, pending approval by both companies' shareholders and regulatory authorities.
