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Coherent Will Merge With II-VI in a $6.3 Billion Deal

By Anders Bylund - Mar 25, 2021 at 5:46PM

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Lumentum goes home with a $218 million breakup fee, while competing bidder MKS Instruments never had a signed deal.

Laser equipment maker Coherent (COHR) has picked a winner in the three-company buyout battle that started in January. Optical materials specialist II-VI (IIVI 2.54%) gets the nod, sending manufacturing process expert MKS Instruments (MKSI -1.48%) and optical communications equipment giant Lumentum (LITE -6.85%) home empty-handed.

II-VI's winning bid will exchange each Coherent share for $220 in cash and 0.91 shares of II-VI. That offer values the target at $282 per share at Thursday's price for II-VI (though that will, of course, change as the buyer's stock price does). That adds up to a $6.9 billion deal, more than 20% above Lumentum's initial offer for Coherent.

In a separate press release, Lumentum noted that II-VI's bid was 0.7% lower based on Wednesday's closing prices for each stock. Coherent management insisted that the II-VI bid was superior in other ways.

"The combination of II-VI and Coherent will increase our collective exposure to irreversible megatrends for decades to come," said II-VI CEO Vincent Mattera.

An office worker contemplates a mural of jigsaw puzzle pieces, mostly unconnected.

Image source: Getty Images.

The drama started two months ago, when Coherent agreed to a cash-and-stock acquisition by Lumentum with a $5.7 billion total price tag. MKS Instruments stepped in two weeks later, offering slightly more generous terms in another cash-plus-stock bid. On Feb. 16, II-VI joined the fun with another part-stock and part-cash buyout offer. Coherent shrugged off MKS Instruments' bid, but signed a total of three revised term sheets with Lumentum and II-VI over the next several weeks.

Coherent is sending a $218 million breakup fee to Lumentum and preparing to run the customary gauntlet of regulatory and shareholder approvals. The deal is expected to close in the fourth quarter.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends II-VI and Lumentum Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Coherent, Inc. Stock Quote
Coherent, Inc.
COHR
II-VI Incorporated Stock Quote
II-VI Incorporated
IIVI
$54.60 (2.54%) $1.35
MKS Instruments, Inc. Stock Quote
MKS Instruments, Inc.
MKSI
$117.09 (-1.48%) $-1.76
Lumentum Holdings Inc. Stock Quote
Lumentum Holdings Inc.
LITE
$89.60 (-6.85%) $-6.59

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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