Lumentum to acquire Coherent in $5.7B cash and stock transaction, sees accretion

Lumentum (LITE) and Coherent (COHR) announced that they have entered into a definitive agreement under which Lumentum will acquire Coherent in a cash and stock transaction valued at $5.7B. Under the terms of the agreement, which has been unanimously approved by the boards of both companies, Coherent stockholders will receive $100.00 per share in cash and 1.1851 shares of Lumentum common stock for each Coherent share they own. At closing, Coherent stockholders are expected to own approximately 27% percent of the combined company. The combination unites Coherent's photonics and lasers businesses with Lumentum's telecom, datacom, and 3D sensing photonics businesses, creating a photonics technology company with increased scale and market reach. The company said the combination accelerates Lumentum's penetration of the more than $10B market for lasers and photonics outside of the communications and 3D sensing applications. The combined company is expected to generate more than $150M in annual run-rate synergies within 24 months of the closing of the transaction. The transaction is expected to be accretive to the combined company's non-GAAP earnings per share during the first full year after the close of the transaction. The transaction value represents a premium of 49% to Coherent's closing price on January 15. Lumentum intends to finance the cash consideration of the transaction through a combination of cash on hand from the combined company's balance sheet and $2.1B in new debt financing from a fully committed Term Loan B. Two members of the Coherent board will be appointed to the Lumentum board, which will be expanded to nine directors, at the closing of the transaction. The transaction is expected to close in the second half of calendar year 2021, subject to approval by Lumentum's and Coherent's stockholders, receipt of regulatory approvals and other customary closing conditions.