II-VI Joins Lumentum and MKS Instruments in Bidding War for Coherent; II-VI Offers $260 per Share
II-VI has made an offer to acquire Coherent in a cash and stock transaction, after MKS offered its bid to acquire the laser pioneer on Monday. Under the terms outlined in a letter to Coherent’s board of directors, Coherent shareholders would receive $130 in cash and 1.3055 II-VI common shares for each Coherent share. Based on closing price of II-VI shares on Feb. 11, the proposal is valued at $260 per Coherent share. II-VI’s bid follows an initial proposal from Lumentum, which was then followed by a competing offer from MKS.
II-VI’s proposal represents a premium of 24% to the implied value of Coherent’s merger agreement with Lumentum, based on Lumentum’s closing share price Feb. 11, and a 9.8% premium to the implied value of MKS Instruments’ acquisition proposal based on its closing price on the same day.
In a letter from II-VI to Coherent’s board of directors issued along with a press release announcing the proposal, II-VI outlined terms of the merger agreement, noting that the agreement “is substantially identical to the Current Merger Agreement with Lumentum,” though they “proposed improvements for the benefit of Coherent and its stockholders.”
Among those incentives were the removal of a termination fee to be paid by Coherent in the event that the company terminates an agreement with II-VI to pursue a superior proposal. II-VI also shortened the outside date in the agreement by three months based on what the company cited as its confidence that regulatory approvals for their transaction will be received in a timely fashion.
“In sum,” the letter stated, “our proposed merger agreement reflects superior terms for your stockholders compared to both the current merger agreement and the merger agreement we understand was proposed by MKS.”
Because II-VI has substantially less product overlap with Coherent than either Lumentum or MKS, II-VI believes there is greater certainty of closing and with less potential impact to the combined value, a press release from II-VI stated. II-VI also expects to achieve estimated, combined run-rate synergies of $200 million annually within 36 months. The company anticipates the transaction to be accretive to non-GAAP EPS in the second year following closing.
“We firmly believe our proposal is far superior to Coherent’s existing merger agreement with Lumentum and the recent acquisition proposal from MKS, as it is a more compelling strategic fit and would provide Coherent’s shareholders with meaningful upside opportunity,” Vincent Mattera Jr., CEO of II-VI said in a statement. “Moreover, we are confident that our transaction would have greater certainty of closing. In particular, we have not identified any competitive overlaps between Coherent’s and II-VI’s respective businesses in China.”
II-VI intends to fund the transaction with cash on hand and debt financing led by J.P. Morgan Securities LLC. Additionally, Bain Capital has expressed strong interest in a potential equity investment in the combined company. The execution of a definitive merger agreement between the companies would be subject to approval by each company’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 II-VI and Coherent shareholders.
/Buyers_Guide/Coherent_Corp/c19039
/Buyers_Guide/Coherent_Inc/c2706
/Buyers_Guide/MKS_Instruments_Inc/c9729
/Buyers_Guide/Lumentum_Operations_LLC/c7335