Coherent (COHR) has suddenly become hot property, with three companies bidding on this photonics, laser, and optical components company. The latest entrant, II-VI (IIVI), would appear to be seeking to not only round out some of its assets in photonics, but also further vertically integrate its laser and optics capabilities, as well as expand its addressable market opportunities outside of communications.
The $6.5B price that II-VI is offering is indeed steep (or closer to $6.8B including a break-up fee), but II-VI’s $200M synergy target may well prove conservative and II-VI has a good history where deal integration is concerned. What’s more, there’s legitimate scarcity value here, and II-VI won’t really have another opportunity at an asset like this.
The Coherent deal isn’t a “must have” for II-VI, and the added debt will be an issue for some investors, but I believe it makes long-term strategic sense. My bigger issue with II-VI is the valuation, as II-VI has definitely transited to “growth stock” valuation over the past six months or so. Granted, with II-VI’s leverage to telecom and datacom infrastructure spending, 3D sensing growth, silicon carbide growth, and other drivers, it deserves to be treated like a growth stock, but the valuation isn’t as straightforward as before.
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II-VI Dives Into The Battle For Coherent And More Diversification
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