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II-VI (IIVI) Shareholders Give Approval to Coherent Buyout

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II-VI Incorporated (IIVI - Free Report) yesterday announced that its shareholders voted in favor (with 99% notes) of II-VI acquiring Santa Clara, CA-based Coherent, Inc. (COHR - Free Report) . Concurrently, the latter’s stockholders also unanimously (with 99% votes) favored the merger transaction.

It is worth noting here that the merger agreement was signed between the above-mentioned parties on Mar 25, 2021. II-VI’s shares gained 1.78% yesterday, ending the trading session at $71.31.

Coherent specializes in providing lasers as well as related system solutions and technologies. Its offerings are mainly used for industrial, scientific and commercial research.

Inside the Headlines

Per the terms of the merger agreement signed in March, II-VI will acquire Coherent’s outstanding shares in lieu of a cash payment of $220 per share and stock offering of 0.91 of II-VI shares for a Coherent’s share. The transaction value will be funded by II-VI through available cash, equity investment (committed by Bain Capital) and debt financing ($5.4 billion).

The merger is anticipated to create a behemoth in laser technology and systems, photonic solutions, and compound semiconductors. Solid footholds in laser-additive manufacturing, aerospace and defense, and life sciences markets as well as improved technological capabilities, market intelligence, global presence, and value-chain-related synergies are the likely advantages of the merger.

The operations of II-VI and Coherent are anticipated to generate $4.1 billion in revenues annually. Cost synergies of $250 million too are anticipated to be realized annually after the completion of two years of closing. Further, IIVI’s earnings per share (non-GAAP) will receive a boost from the merger in the second year post the transaction closing.

The accomplishment of the transaction is subject to the receipt of regulatory approvals and completion of other customary closing conditions. The likely completion time is the end of 2021 or first-quarter 2022 (beginning).

Zacks Rank, Estimate Trend and Price Performance

With a $7.4-billion market capitalization, II-VI currently carries a Zacks Rank #3 (Hold). The company is poised to benefit from solid product offerings, healthy contract wins and backlog, and buyouts activities. The rise in the cost of sales might be concerning.

In the past three months, shares of the company have rallied 1.1% compared with the industry’s growth of 3.1%.

Zacks Investment ResearchImage Source: Zacks Investment Research


The Zacks Consensus Estimate for earnings is pegged at $3.61 for fiscal 2021 (ending June 2021) and $3.89 for fiscal 2022 (ending June 2022), indicating declines of 3% and 7.6% from the respective 60-day-ago figures. Also, the company’s earnings estimates for the fourth quarter of fiscal 2021 (ending June 2021) are pegged at 76 cents per share, reflecting a decline of 14.6% from the 60-day-ago figure.

Stocks to Consider

Two better-ranked stocks in the industry are A. O. Smith Corporation (AOS - Free Report) and Emerson Electric Co. (EMR - Free Report) . The companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, estimates for the companies’ earnings have improved for the current year. Also, earnings surprise for the last reported quarter was 7.14% for A. O. Smith and 7.78% for Emerson.

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