MKS Makes Bid to Acquire Coherent

Coherent Inc. received an unsolicited acquisition proposal from MKS Instruments Inc. to acquire Coherent in a cash and stock transaction, Coherent said in a press release. Coherent issued the release 20 days after it e ntered into a $5.7 billion merger agreement with Lumentum, pursuant to which Lumentum agreed to acquire Coherent.

Under the terms of MKS’ proposal, each share of Coherent common stock would be exchanged for $115 in cash and 0.7473 of a share of MKS common stock at the completion of the transaction.

Coherent announced its transaction with Lumentum Holdings Inc. on Jan. 19. Per that deal, Lumentum agreed to acquire Coherent with each share of Coherent common stock being exchanged for $100 in cash and 1.1851 shares of Lumentum common stock at the completion of the transaction.

MKS, in a release confirming its offer, said its proposed transaction carries a value of $6 billion (implied value of approximately $240 per share).

“We believe this transaction would create a global photonics leader with a world-class technology portfolio, proven operational capabilities, deep customer relationships, and a track record of sustainable and profitable growth, uniquely positioned to solve our customers’ most difficult challenges,” said John T.C. Lee, president and CEO of MKS. “We believe the combination of MKS and Coherent would drive growth and shareholder value through increased technology investment that creates new solution platforms and accelerates innovation within the industry, as well as meaningful synergies.”

MKS’ proposal was conveyed in a Feb. 4 offer letter (here) to Coherent’s board of directors.

Lumentum, in response to the new offer, issued the following statement regarding its previously announced definitive agreement to acquire Coherent:

“The combination of Lumentum and Coherent will create a leading photonics technology company and will deliver compelling strategic and financial benefits to both companies’ stakeholders,” said Alan Lowe, Lumentum president and CEO. “We believe our transaction is superior. In contrast to the proposal by MKS Instruments, the Lumentum-Coherent transaction has a clear path to regulatory approval and completion, and Lumentum remains committed to closing the transaction in the second half of the year. We look forward to uniting two global industry leaders — with complementary businesses — to accelerate photonic innovation and pursue exciting new growth initiatives to the benefit of our respective customers, employees, and stockholders.”

Executives from Lumentum previously joined Coherent CEO Andy Mattes on an analysts call on Jan. 19, outlining the deal that the two sides had formed.

Now, according to Coherent, the company’s board of directors is evaluating MKS’ proposal. After consulting with its financial and legal advisers, Coherent said its board of directors has determined that MKS’ proposal could lead to a transaction that is superior to its pending transaction with Lumentum, and, accordingly, Coherent has determined to engage in discussions with MKS to further evaluate the comparative benefits and risks of MKS’ proposed transaction relative to Coherent’s pending transaction with Lumentum.

Still, Coherent said its board of directors continues to recommend Coherent’s merger agreement with Lumentum to its stockholders, and is not modifying or withdrawing its recommendation with respect to the Lumentum merger agreement, or proposing to do so, and is not making any recommendation with respect to MKS’ proposal at this time.

Lumentum’s board of directors continues to recommend the transaction with Coherent to its stockholders.

Both deals — the still-pending Lumentum acquisition and the MKS offer — are subject to customary closing conditions including receipt of U.S. and foreign antitrust approvals and stockholder approvals.

At the time it announced the Coherent acquisition last month, Lumentum said the deal was 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.

MKS said the deal involving its company is expected to be accretive to non-GAAP earnings per share within 12 months of close, with anticipated synergies of $180 million within 36 months of close. MKS intends to fund that transaction with cash on hand and debt financings. The execution of a definitive merger agreement between Coherent and MKS would be subject to approval of each party’s board of directors, and completion of the transaction would be subject to customary closing conditions, including receipt of required regulatory approvals and approval of MKS’ and Coherent’s respective stockholders. Completion of the transaction would not be subject to any financing condition.

MKS’ release is available here, Coherent’s release is available here, and Lumentum’s statement is available here.