II-VI Wins $7 Billion Coherent Battle in Blow to Lumentum

Coherent Inc. accepted II-VI Inc.’s $6.88 billion takeover offer, saying it was a better fit for the laser maker than rival bidder Lumentum Holdings Inc.

While Lumentum’s bid was higher, Coherent said its board favored II-VI after weighing the risks and opportunities of the rival approaches. Coherent must now pay Lumentum $217.6 million in fees for breaking up their previously agreed deal, which was worth $6.92 billion based on the latter’s closing share price on Wednesday.

II-VI “believes its proposal would create significant value for the shareholders of both companies and remains superior to Lumentum’s latest proposal,” II-VI said in a statement late Wednesday. Its offer also includes a $1.5 billion investment from Bain Capital.

Coherent said on Thursday that II-VI’s bid on March 17 was still a “company superior proposal” under Coherent’s previous merger agreement with Lumentum. II-VI’s offer of $220 in cash and 0.91 of a II-VI share valued Coherent at $281.21 per share. Lumentum’s bid was worth $283.12 per Coherent share.

The eight-round contest involving three suitors underscores the value of Coherent’s laser technology. One of the company’s specialties is supplying lasers to makers of organic light emitting diode, or OLED, displays, a big feature in a new generation of 5G phones.

Coherent’s roots trace back 55 years to a crude design in a laundry room in Palo Alto, California. Now based in nearby Santa Clara, the company makes laser products for a range of industries, including manufacturing, bioscience, aerospace and communications. Network-gear makers use lasers to power fiber-optic equipment, a boom-and-bust industry that’s currently on the upswing as networks require more capacity.

Sales of optical transport gear are expected to grow 30% annually and reach $85 billion in five years, according to a January report by Dell’Oro Group. Carriers like AT&T Inc., Verizon Communications Inc. and Lumen Technologies Inc. have announced fiber-optic network expansion plans, and a lot of that will support the build-out of 5G.

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