Shares of Finisar (FNSR) gained 39.9% in November of 2018, according to data from S&P Global Market Intelligence. The maker of optical communications components accepted a buyout offer from sector peer II-VI (IIVI -2.55%), priced 38% above the stock's value at the time.
II-VI is picking up Finisar for $15.60 per share in cash plus 0.2218 II-VI shares per Finisar stub, structuring the deal at roughly 13% stock and 87% cash payments at the share prices of November 9. Finisar shareholders will end up owning roughly 31% of the combined entity, and II-VI CEO Vincent Mattera is expected to lead the company. Assuming that all shareholder votes and regulatory approvals work out as planned, the deal should close before the middle of 2019.
II-VI argues that the time is exactly right to combine its own photonics and optoelectronic materials with Finisar's optical modules. Together, the companies hope to exploit several huge secular trends such as the rollout of 5G wireless services, electric and autonomous cars going mainstream, and explosive growth in cloud-computing services. All of these markets depend on some combination of Finisar's and II-VI's products, from networking components to optical sensors.
That being said, investors who want to jump aboard the Finisar/II-VI bandwagon should probably do so via II-VI. The lion's share of the buyout premium has already been priced into Finisar's stock, and only a small portion of the final price tag will be paid in II-VI shares. Hence, II-VI's stock has more room than Finisar's for posting significant gains before the deal closes next summer.