II-VI, Inc. (NASDAQ:IIVI) recently announced, along with Finisar Corporation (FNSR), a global technology leader in optical communications, that they have entered into a definitive merger agreement under which II-VI will acquire Finisar in a cash and stock transaction with an equity value of approximately $3.2 billion.
According to the release, “Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, Finisar’s stockholders will receive, on a pro-rated basis, $15.60 per share in cash and 0.2218x shares of II-VI common stock, valued at $10.40 per share based on the closing price of II-VI’s common stock of $46.88 on November 8, 2018. The transaction values Finisar at $26.00 per share, or approximately $3.2 billion in equity value and represents a premium of 37.7% to Finisar’s closing price on November 8, 2018. Finisar shareholders would own approximately 31% of the combined company.”
II-VI, Inc. (NASDAQ:IIVI) bills itself as a company that develops, manufactures, and markets engineered materials, and optoelectronic components and devices worldwide.
The company operates in three segments: II-VI Laser Solutions, II-VI Photonics, and II-VI Performance Products. The II-VI Laser Solutions segment offers optical and electro-optical components and materials primarily used in high-power CO2 lasers; fiber-delivered beam delivery systems, and processing tools and direct diode lasers for industrial lasers; direct diode laser modules, sub-systems, and systems; super-hard materials processing laser systems; and compound semiconductor epitaxial and gallium arsenide wafers.
The II-VI Photonics segment provides crystal materials, optics, microchip lasers, and optoelectronic modules for use in optical communication networks and other consumer, life sciences, and commercial applications. It also offers pump lasers, optical isolators, and optical amplifiers and micro-optics for optical amplifiers for terrestrial and submarine applications within the optical communications market.
The II-VI Performance Products segment provides infrared optical components and high-precision optical assemblies for military, medical, and commercial laser imaging applications; and silicon carbide engineered materials for thermoelectric devices and subsystems for silicon carbide applications.
The company serves OEMs, laser end-users, system integrators of high-power lasers, manufacturers of equipment and devices for the industrial, optical communications, military, semiconductor, medical and life science markets, consumers, the U.S. government prime contractors, various U.S. government agencies, and thermoelectric integrators. II-VI Incorporated was founded in 1971 and is headquartered in Saxonburg, Pennsylvania.
All in the Family
We started off by noting that IIVI recently hit the wires with the announcement, along with Finisar Corporation (FNSR), a global technology leader in optical communications, that they have entered into a definitive merger agreement under which II-VI will acquire Finisar in a cash and stock transaction with an equity value of approximately $3.2 billion.
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action IIVI shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -2% on above-average trading volume.
All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -5%.
“Disruptive megatrends driven by innovative uses of lasers and other engineered materials present huge growth opportunities for both of our companies,” said Dr. Vincent D. Mattera, Jr., President and CEO, II-VI Incorporated. “In communications, materials processing, consumer electronics and automotive, we expect that the combination with Finisar will allow us to leverage our combined technology and intellectual property in InP, GaAs, SiC, GaN, SiP and diamond to achieve faster time to market, cost and scale. Together, we believe that we will be better strategically positioned to play a strong leadership role in the emerging markets of 5G, 3D sensing, cloud computing, electric and autonomous vehicles, and advanced microelectronics manufacturing.”
II-VI, Inc. (NASDAQ:IIVI) pulled in sales of $314.4M in its last reported quarterly financials, representing top line growth of 20.2%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($271.3M against $225.3M).