II‐VI completed its acquisition of Finisar, bring 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 new II-VI will be organized into two segments:
The Compound Semiconductors Segment is expected to be a market leader in differentiated materials and devices such as those based on gallium arsenide, indium phosphide, gallium nitride and silicon carbide, by independently driving investments that advance its technology roadmaps. The segment will be led by Dr. Giovanni Barbarossa – Chief Strategy Officer, II-VI Incorporated and President, Compound Semiconductors.
The Photonic Solutions Segment leverages II-VI’s compound semiconductor technology platforms to deliver components and subsystems that are differentiated based on deep knowledge of end user applications for our key end markets. The segment will be led by Sunny Sun – President, Photonic Solutions.
“Today our company is taking a giant leap forward in our scale to serve a significantly increasing addressable market,” said Dr. Vincent D. Mattera, Jr., Chief Executive Officer, II-VI Incorporated. “The powerful combination of II-VI and Finisar makes us the global leader in optical communications and continues our leadership in our other key end markets, with a world-class product portfolio and deep technology expertise that enables us to offer more tightly integrated solutions and exceptional overall value for our customers.”
“With nearly 80 years of combined business leadership in photonics and compound semiconductors, it makes sense for Finisar to join the II-VI family to continue to deliver the best products and solutions possible,” said Todd Swanson, Finisar’s Chief Operating Officer and co-CEO. “Thanks to the talents of numerous individuals across this new global powerhouse, II-VI and Finisar are ready to merge into one highly efficient and seamless company with a common culture, vision and mission.”
Under the deal, which was first announced on November 9, 2018, Finisar shareholders will receive on average $15.60 in cash and 0.2218 shares of II-VI common stock per 1.0 share of Finisar common stock depending on each shareholder’s election as laid out in the merger agreement. This transaction is fully taxable to Finisar shareholders. The company expects to achieve $150M in run rate synergies over the next three years. The financing for the transaction was $1.9B of cash raised in a combination of Term Loans A and B with a combined interest rate of L+251 and $1.1B of the company’s stock. Finisar shareholders will own approximately 32% of the combined company.
II-VI also confirmed the following executive team:
- Dr. Vincent D. Mattera, Jr – Chief Executive Officer
- Walter R. Bashaw II – President
- Mary Jane Raymond – Chief Financial Officer
- Dr. Giovanni Barbarossa – Chief Strategy Officer, II-VI Incorporated and President, Compound Semiconductors
- Jo Anne Schwendinger – Chief Legal & Compliance Officer, Corporate Secretary
- Dr. Christopher Koeppen – Chief Technical Officer
II-VI to acquire Finisar in $3.2 billion deal
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.
