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II-VI To Acquire Coherent

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Merger creates a powerhouse of photonics, compound semiconductors, and laser technologies

II-VI , a maker of engineered materials and optoelectronic components,has announced that it is entering into a definitive agreement with Coherent, a maker of lasers, laser-based technologies and laser-based system solutions, under which II-VI will acquire all outstanding Coherent shares in a cash and stock transaction.

Under the terms of the transaction, Coherent shareholders will receive $220.00 in cash and 0.91 of a share of II-VI common stock for each Coherent share.

“We are pleased to have reached an agreement with Coherent to create a global leader in photonic solutions, compound semiconductors and laser technology and systems. Together, we will have significant opportunities to accelerate our growth through complementary technology platforms, strengthen our competitiveness by using our combined scale across the value chain, benefit from deeper market intelligence and expertise, and further diversify our businesses by end market and geography.

"Moreover, the combination of II-VI and Coherent will increase our collective exposure to irreversible megatrends for decades to come. We are excited to welcome the talented Coherent team to II-VI and look forward to working together to deliver significant value to all stakeholders, including both companies' shareholders, customers, employees, and business partners,” said Vincent D. Mattera, Jr.,CEO of II-VI.

Strategic and Financial Benefits

II-V has listed a number of strategic and financial benefits for the merger.

- Creates a global leader of greater scale to address irreversible megatrends: Together, II-VI and Coherent will create a global leader in photonic solutions, compound semiconductors, and laser technology and systems with approximately $4.1 billion in annual revenue, leveraging disruptive technology platforms operating at scale to address a combined available market of approximately $25 billion.

- Accelerates growth through complementary technology platforms: II-VI's and Coherent's complementary lasers, optics, and electronics technologies at the subsystems and systems level will enable compelling solutions to accelerate growth in aerospace and defense, life sciences, and laser-additive manufacturing, while driving margin expansion and profitability. In addition, a highly complementary geographic presence will enable the company to accelerate growth in key industrial markets in Asia.

- Increases competitiveness with combined scale across the entire value chain: There are substantial opportunities to utilize complementary scale at all levels of the value chain and increase competitiveness in all laser technology product lines, including in materials macro- and micro-processing, display processing and instrumentation.

- Increases sales synergies by utilizing global service as a distribution network: Coherent's service network, located in the largest manufacturing hubs in the world, will act as a distribution channel for a broad combined portfolio of components, including II-VI's high-margin aftermarket consumables, as well as a channel for recurring subsystems and systems service contracts.

- Gains deeper market intelligence from complementary business models: By harnessing our combined expertise and strong global presence at all levels of the value chain - including engineered materials, components, systems, and services - we will gain deeper insights into laser end market that will inform our strategic investments ahead of demand and influence industry direction, which will lead to stronger customer partnerships and higher returns on our investments.

- Accomplishes sustained growth from increased diversification of combined leadership: II-VI will have greater diversification of revenue by end market and geography, cushioning short-term cycles and enabling sustained strategic investments in new technology platforms to fuel long-term growth.

- Generates significant cost synergies and accretion: The combined company is expected to achieve $250 million in annual cost synergies to be realized within 36 months of close, and the transaction is expected to be accretive to II-VI's non-GAAP earnings per share in the second year following close.

II-VI plans to finance the transaction with cash on hand, approximately $5.4 billion in fully committed debt financing from J.P. Morgan Securities LLC and an equity investment from Bain Capital. Bain Capital has committed $1.5 billion in the combined company at a conversion price of $85.00 per share and has confirmed it is willing to increase this commitment by at least $300 million of an additional $650 million optional amount on the same terms, for a total commitment of at least $1.8 billion. The Bain Capital investment will enable II-VI to significantly reduce leverage.



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