II-VI agreed to acquire Finisar in a cash and stock deal valued at approximately $3.2 billion, creating one of the largest photonics and compound semiconductor companies.
The deal, which has been approved by the boards of both companies, brings together two optical networking industry leaders serving the broad set of fast-growing markets of communications, consumer electronics, military, industrial processing lasers, automotive semiconductor equipment and life sciences. The combined company’s portfolio will span high-performance datacom transceivers, products based on coherent transmission technology and ROADM solutions for next-generation undersea, long-haul and metro networks, hyperscale datacenters and 5G optical infrastructure.
The companies said their combined optoelectronics technology leadership based on GaAs and InP compound semiconductor laser design platforms, together with one of the world’s largest 6-inch vertically integrated epitaxial growth and device fabrication manufacturing platforms, will enable faster time to market for a greater number of opportunities in 3D sensing and LiDAR.
“Disruptive megatrends driven by innovative uses of lasers and other engineered materials present huge growth opportunities for both of our companies,” said Dr. Vincent D. Mattera, Jr., President and CEO, II-VI Incorporated. “In communications, materials processing, consumer electronics and automotive, we expect that the combination with Finisar will allow us to leverage our combined technology and intellectual property in InP, GaAs, SiC, GaN, SiP and diamond to achieve faster time to market, cost and scale. Together, we believe that we will be better strategically positioned to play a strong leadership role in the emerging markets of 5G, 3D sensing, cloud computing, electric and autonomous vehicles, and advanced microelectronics manufacturing.”
“The combination of our state-of-the-art technology platforms, deep customer relationships, great assets and amazing talent will enhance our ability to hit market windows that won’t stay open for long,” said Michael Hurlston, Finisar’s CEO. “This combination will accelerate our collective growth and will take advantage of the technology, products and manufacturing expertise that Finisar has uniquely developed over the course of its 30 year history.”
Highlights of the deal:
- Finisar’s stockholders will receive, on a pro-rated basis, $15.60 per share in cash and 0.2218x shares of II-VI common stock, valued at $10.40 per share based on the closing price of II-VI’s common stock of $46.88 on November 8, 2018.
- The transaction values Finisar at $26.00 per share, or approximately $3.2 billion in equity value and represents a premium of 37.7% to Finisar’s closing price on November 8, 2018.
- Finisar shareholders would own approximately 31% of the combined company.
- Together, II-VI and Finisar will have 24,000 employees in 70 locations.
- The combined company will hold over 2,700 patents
- The combined company had approximately $2.5 billion of annual revenue.
- The combined company expects to realize $150 million of run-rate cost synergies within 36 months of closing. Synergies are expected to be achieved from procurement savings, internal supply of materials and components, efficient research and development, consolidation of overlapping costs and sales and marketing efficiencies.
- The transaction is expected to drive accretion in Non-GAAP earnings per share for the first full year post close of approximately 10% and more than double that thereafter.
- II-VI intends to fund the cash consideration with a combination of cash on hand from the combined companies’ balance sheets and $2 billion in funded debt financing.
- The transaction is expected to close in the middle of calendar year 2019.
