Lumentum to Acquire Coherent Inc.

Laser and optical fiber developer and manufacturer Lumentum is acquiring laser manufacturer Coherent in a transaction worth $5.7 billion. The move brings together the successor company of fiber optic darling JDS Uniphase with one of the original 1960s laser pioneers.

The acquisition specifically brings together Coherent’s photonics and lasers businesses in the microelectronics, precision manufacturing, instrumentation, and aerospace and defense markets with Lumentum’s telecom, datacom, and 3D sensing businesses, creating a diversified photonics technology company with significantly increased scale and market reach. In a shared press release, the companies said the combination accelerates Lumentum’s penetration of the more than $10 billion market for lasers and photonics outside of the communications and 3D sensing applications. The powerful R&D engine of the combined company will be primed to accelerate innovation in existing and future markets that need the unique capabilities that photonics bring.

Lumentum, an industry-leading provider of optical networking solutions with net revenues of more than $1.56 billion in the last two full fiscal years, became an independent publicly traded company in 2015 when JDS Uniphase Corp. (now Viavi Solutions Inc.) spun off its communications and commercial optical product business segment. Coherent, founded in 1966, developed the first commercially available CO₂ laser.

Additionally, the combined company will be better positioned to serve the needs of a global customer base increasingly dependent on photonics to enable important end-market transitions, including the shift to digital and virtual approaches to work and life, the transition to 5G in wireless networking, advanced bioinstrumentation, advanced microelectronics, and new materials for next-generation consumer electronic devices, flat-panel and OLED displays, communications equipment, electric and autonomous vehicles, and energy storage.

Under the terms of the agreement, which has been unanimously approved by both companies’ boards of directors, Coherent stockholders will receive $100 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% of the combined company. 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.

"In our five years as a stand-alone public company, we have focused on developing the most innovative products and technology in our industry and partnering with market-leading customers to help them compete and win in their markets,” said Alan Lowe, Lumentum president and CEO.

“As we look ahead, we are thrilled to join forces with Coherent to create one of the world’s largest and most diverse photonics technology companies with leading positions in the growing market for photonics. Coherent brings one of the most recognizable and respected brands in the photonics industry and a very talented and innovative team. By increasing our scale, expanding our portfolio, and bolstering our R&D capabilities at a time when global markets are increasingly relying on photonics products and technologies, we are confident in our combined ability to pursue exciting new growth opportunities.”

Andy Mattes, Coherent president and CEO, said, “We anticipate the combined complementary product portfolio, breadth of customer application knowledge, and R&D capabilities, all based on photonics, will accelerate innovation and adoption of photonics across the many markets that we serve.

"We are excited to bring Coherent’s strength in OLED display manufacturing, semiconductor wafer inspection, and life science instrumentation to Lumentum’s portfolio, to name but a few of the key applications we serve, and believe Lumentum’s expertise and scale in world-class photonics components and systems will accelerate Coherent’s vertical integration and addressable market expansion in several high-growth areas, such as directed energy in defense and precision battery welding in automotive.”

The industry-shifting acquisition follows a recent photonics industry trend, marked by Teledyne’s acquisition of FLIR Systems earlier this month and by previous deals including TRUMPF’s renaming and merger of SPI Lasers, ZEISS acquiring a majority stake in the imaging business of arivis AG, Luna Innovations Inc.’s purchase of OptaSense Holdings Ltd, and Lumentum itself acquiring certain technology assets of TriLumina.

The current transaction value represents a reported premium of 49% to Coherent’s closing price on Jan. 15, 2021. 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 $2.1 billion in new debt financing from a fully committed Term Loan B.

The companies said they expect the deal to deliver more than $150 million in annual run-rate synergies within 24 months of closing, and be accretive to non-GAAP earnings per share during the first full year after closing.

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.