Coherent Rises on $6.4 Billion II-VI Offer, Widening Bid War

II-VI Inc. made a $6.4 billion offer for Coherent Inc., setting up a three-way fight for the fiber-optic laser-maker with rival suitors Lumentum Holdings Inc. and MKS Instruments Inc.

The approach Friday from electronic-components maker II-VI, valued at $260 a share, counters Coherent’s agreed $5.7 billion merger with Lumentum and an unsolicited $5.9 billion offer this week from MKS. Coherent’s board has said the MKS bid could be superior to Lumentum’s, and the company committed to talking with MKS.

The new offer sent Santa Clara, California-based Coherent’s shares up as much as 15% to $261.94 in New York trading.

Coherent Rises on $6.4 Billion II-VI Offer, Widening Bid War

The widening fight highlights the enthusiasm among gearmakers and investors who anticipate greater demand for fiber-optic equipment to underpin future 5G wireless networks, aimed at enabling autonomous vehicles and real-time cloud connections.

The offer from II-VI -- pronounced “Two-Six,” a reference to the groups of chemical elements that produce optical crystals -- could open the door to another round of bids for Coherent as rival network-equipment makers try to load up on key technology ahead of the expected spending surge.

Fiber-Optic ‘Boom’

Sales of optical transport gear are expected to grow 30% annually and reach $85 billion in five years, according to a report last month by Dell’Oro Group.

“There’s absolutely a boom in fiber from a telecom perspective,” said Andy Walker, a communications, media and technology strategist with Accenture. Carriers like AT&T Inc., Verizon Communications Inc. and Lumen Technologies Inc. have all announced fiber-optic network expansion plans, and a lot of that will support 5G buildout, he said.

II-VI offered $130 in cash and 1.3055 II-VI shares for each Coherent share. The Saxonburg, Pennsylvania-based company said its proposal represents a 24% premium to Lumentum’s merger agreement and is 9.8% more than MKS’s bid, based on Thursday’s closing prices.

Milpitas, California-based Lumentum agreed Jan. 19 to pay $100 and 1.1851 of its shares for each Coherent share, valuing its bid at the time at $226 a share, or about $5.7 billion. Andover, Massachusetts-based MKS on Feb. 8 offered $115 in cash and 0.7473 of a share, then worth around $240, or $5.9 billion.

On Thursday, Lumentum reiterated that it considered its bid superior and said the unsolicited MKS offer would run into potential challenges from antitrust regulators due to overlapping products.

Coherent had said on Feb. 8 that it would hold talks with MKS to discuss the proposal, though its board still recommended the Lumentum deal. Coherent would have to pay a breakup fee of as much as $242.6 million if it terminates the deal and takes another offer, according to a filing.

Coherent shares have climbed from $151.95 on Jan. 15, the last trading day before the Lumentum deal was announced.

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