Lumentum’s $5.7 bn acquisition of Coherent

By Christopher Shim, Rohan Shah (University of Cambridge), Ho Hai Ivan Chung, Kevin Lee (Hong Kong University of Science and Technology)


Overview of the deal

Acquirer: Lumentum

Target: Coherent

Implied Equity Value:

Total Transaction Size: $5.7 Billion

Closed date: January 19, 2021

Acquirer Advisor: Bank of America

On January 19th, photonic product manufacturer Lumentum Holdings Inc. announced that it has agreed to acquire its rival, Coherent Inc., in a cash-and-stock deal valued at $5.7 billion. Coherent holders will receive $100 in cash and 1.1851 Lumentum shares for each Coherent share, with a total of $214 in value. This reflects a nearly 50% premium to Coherent stock price before the announcement.

This acquisition is a big move in consolidating the photonic technology market which covers innovative areas such as cloud and networking, advanced manufacturing and 3D Sensing. It further strengthens the leading position of Lumentum and expands its product range. Within the photonics and laser market, Coherent has a leading position in Microelectronics, Precision Manufacturing, Instrumentation, and Aerospace & Defense while Lumentum is strong in telecom, datacom, and 3D sensing businesses. Thus, the acquisition can create a combined company with a larger business scale, wider market reach and diversified photonic product range.

After the transaction, Coherent shares will own about 27% of the combined company and two current Coherent directors will be added to the Lumentum board. The deal is expected to be accretive in the first year after closing and to generate more than $150 million in annual run-rate synergies within 24 months of close.

“We are thrilled to join forces with Coherent to create one of the world's largest and most diverse photonics technology companies with leading positions in the growing market for photonics” - Alan Lowe, Lumentum President and CEO

Company Details: (Acquirer - Lumentum)

Lumentum (NASDAQ: LITE) is a major designer and manufacturer of innovative optical and photonic products enabling optical networking and laser applications worldwide. The products accelerate the speed and scale of cloud, networking, advanced manufacturing, and 3D sensing applications.

Founded in 2015 (Spin-off from JDSU), headquartered in San Jose, California, United States

CEO: Alan Lowe

Number of employees: 5,161

Market Cap: $7.50bn (as of 22/01/2021)

EV: $6.95bn

LTM Revenue: $1.60bn

LTM EBITDA: $470.90m

LTM EV/Revenue: 4.13x