More contenders vie for Coherent

Since the announcement by Lumentum to acquire Coherent, two major companies in the photonics space have declared an interest in the laser systems and photonics company.

The market research and strategy consulting company, Yole Développement (Yole) keep an eye on the discussions between Lumentum and Coherent and point out the issues behind them. Indeed, this acquisition could represent a big change in the photonic industry. Amandine Pizzagalli, Finance Project Manager, Yole Finance, part of Yole and Martin Vallo, Technology & Market Analyst at Yole deliver a snapshot of these discussions. Their analysis is based on a wide collection of photonic reports including Edge Emitting Lasers: Market and Technology Trends 2019, Optical Transceivers for Datacom & Telecom 2020, InnoLight’s 400G QSFP-DD Optical Transceiver, 3D Imaging & Sensing 2020

In January 2021, Lumentum announced a bid to acquire Coherent as part of a $5.7 billion cash and stock transaction. Coherent shareholders will receive $100.00 per share in cash and 1.185 shares of Lumentum stock for each Coherent share owned. The offer put the total value per share at $206.13. As a result, Coherent stockholders are expected to own approximately 27% of the combined company.

The following month, two unsolicited bids were received from MKS and II-VI. MKS bid $6 billion in a cash and stock transaction, which proposed each Coherent common stock would be bought for $115.00 in cash and exchanged for 0.7473 of a share of MKS common stock. This adds a 16% premium to the Lumentum proposal, valuing each share at $240.00.

A few days later, II-VI submitted a bid worth $6.5 billion, proposing to pay $130 in cash and 1.3055 shares of II-VI for each Coherent share. This raised the total value per share to $260.00.

Under the terms of II-VI’s revised proposal, each share of Coherent common stock would be exchanged for $170.00 in cash and 1.0981 shares of II-VI common stock at the completion of the transaction. Coherent notified Lumentum that it intends to terminate their merger agreement unless Coherent receives a revised proposal from Lumentum by 11:59 p.m. Pacific Time on March 11, 2021. 

And Lumentum today announced an amendment. Under the March 10 press release, which was unanimously approved by the Boards of Directors of both companies, Lumentum will acquire Coherent in a cash and stock transaction whereby Coherent stockholders will receive $175.00 per share in cash… More

The bidding war continues, and we keep an eye on this acquisition. Stay tuned and follow up our updates below.

Key additions

The value of Coherent for the three bidding companies relied in its material processing portfolio.

Coherent produces laser components, laser sub-systems and laser systems. Its components and systems are used in medical devices, semiconductor wafer marking and precision welding and, in the semiconductor manufacturing sector, for microelectronics to manufacture displays, advanced packaging and interconnects.   

It does not, however, have kW material processing or cutting, and cladding laser technologies, which both Lumentum and II-VI have in their portfolios. Lumentum and II-VI also develop laser devices and modules for materials processing laser and could be suppliers to Coherent and MKS.

Like Coherent, MKS operates in the precision and semiconductor manufacturing markets with ultra-fast lasers and amplifiers, fiber lasers and other laser systems, photonics optical components, lens assemblies and vibration isolation devices. Its commercial laser systems and photonics instruments compete with Coherent’s portfolio.

Lumentum also produces commercial laser systems and competes with II-VI in the production of optical components, modules and sub-systems for optical communication and semiconductor laser diodes for industrial and consumer products Coherent serves the photonics, microelectronics, precision manufacturing, instrumentation and aerospace & defense markets, while Lumentum operates in the telecom, datacom and 3D sensing photonics business areas. Lumentum is a stronger player in fiber optic components and modules for high-speed communications and is a leader in 3D sensing. The addition of Coherent’s OLED and advanced packaging would further diversify Lumentum’s advanced manufacturing solutions beyond debonding and annealing.

II-VI has a portfolio of fiber laser, epitaxial wafer and substrates, differentiating it somewhat from Lumentum and MKS.

Lumentum and II-VI supply Ethernet optical transceivers, Fiber Channel receivers, together with high speed VCSELs and laser devices for the datacom sector. They also provide ROADM, coherent DWDM and tunable receivers, laser devices for data transport and III-V epitaxial wafers for the telecom sector.

In the automotive sensing market, Lumentum and II-VI both have EEL and VCSELs, fiber amplifiers, FMCW detection products and mirrors for scanning. These 3D sensing devices are used in vehicles’ LiDAR systems. For consumer products, these two companies also serve 3D sensing with VCSELs, used in mobile devices, AR/VR, automotive and industrial applications.

Coherent competes with Lumentum and MKS in the commercial laser market, and with MKS in the photonics instrumentation sector. It is also a competitor to II-VI in the biomedical instrument market, DNA sequencing and fluorescence microscopy.

Company profiles

In summary, Lumentum and II-VI have diversified photonics technologies and revenue streams. MKS, like Coherent, is a leader in the manufacture of ultra-fast lasers and laser systems.

Of the three companies wooing Coherent, MKS has many overlaps including life sciences, industrial technologies and test and measurement. It aims to become the global leader in laser and photonics and acquiring Coherent would strengthen its expertise in photonics. There is also an overlap in picosecond and femtosecond lasers for research and biomedical applications.

The addition of Coherent to the Lumentum business would broaden its portfolio, including 3D sensing and optical communication products with a differentiated portfolio of photonics products, enabling it to serve numerous and growing end markets where it currently does not have a leading position. It would also strengthen its microelectronics offering, with OLED screen and flat panel display manufacture. Furthermore, it would allow Lumentum to capitalize on synergies between 3D sensing for industrial applications and traditional laser manufacturing, as well as complement its offering for other industries, e.g. biometric security, diagnostic tool and electric vehicles.

Coherent has technologies that are complementary to II-VI and the acquisition could accelerate growth with the use of laser components and systems for materials processing. It could also increase competitiveness by exploiting economies of scale across the value chain. Examples of this could be the synergies between 3D sensing for industrial applications and traditional laser manufacturing. As is the case with Lumentum, the acquisition would also mean II-VI’s annealing business could be expanded in the microelectronics market.

It should also be noted that China may not grant regulatory approval for Lumentum or MKS’s acquisition of a direct competitor. There is no overlap in business interests in China for II-VI.

  • Read the March 8 update: here
  • Read the March 12 update: Here
  • Read the March 17 update: Here
  • Read the March 18 update: Here

And see below the status of the discussions:

Stay tuned on i-Micronews to follow the photonic industry and get up-to-date information!

About the authors

Martin Vallo, PhD serves as a Technology & Market Analyst specialized in solid-state lighting technologies, within the Photonics, Sensing & Display division at Yole Développement (Yole). With 9 years’ experience within semiconductor technology, Martin is involved today in the development of technology & market reports as well as the production of custom consulting projects at Yole.

Prior his mission at Yole, he worked at CEA (Grenoble, France), with a mission focused on the epitaxial growth of InGaN/GaN core-shell nanowire LEDs by MOCVD and their characterization for highly flexible photonic devices. Martin graduated from Academy of Sciences, Institute of Electrical Engineering (Slovakia) with an engineering degree in III-nitride semiconductors.

Amandine Pizzagalli is a Finance Project Manager at Yole Finance, part of Yole Développement (Yole). Amandine oversees finance consulting and advisory services, including M&A, capital raise, IPO definition, valuation & financial analyses.

Previously, Amandine was part of the development of Yole’ Semiconductor & Software division. Her activity was focused on the development of comprehensive analyses dedicated to the equipment, materials industries and manufacturing processes.

In parallel, she has spoken in numerous international conferences and has authored or co-authored more than 10 papers.

Amandine holds an international MBA from IAE Lyon, School of Management (France) and an electronic engineering master degree from the engineering school, CPE Lyon (France) with an added degree, focusing on semiconductor manufacturing technology, from KTH Royal institute of technology (Sweden).

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