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II-VI to Buy Apple Supplier Finisar in $3.2 Billion Deal

Giles Turner

(Bloomberg) -- II-VI Inc. agreed to buy Apple Inc. supplier Finisar Corp. for $3.2 billion in cash and stock, bringing together two firms focused on semiconductor lasers and optics.

The deal will give the companies a stronger position in technology used in “hyperscale” data centers, high-speed 5G infrastructure, 3-D sensing and driverless cars as well as access to larger markets, the firms said in a statement on Friday. Finisar shares rose 14 percent to $21.57 on Friday.

Key Insights

Pittsburgh-based II-VI focuses on designing and engineering industrial lasers as well as lenses, prisms, and other optical components, while Finisar, based in Sunnyvale, California, builds sensors that can be used in facial recognition, transceivers and other components for telecom networks and fiber-optic cables.The merger brings together two companies that supply components for LiDAR, a key technology for the development of autonomous cars. The deal follows a rough summer for laser stocks -- and optical components more broadly -- amid concerns about tariffs and pricing pressure.Finisar customers also include Apple, Cisco Systems Inc., Hewlett Packard Enterprise Co. and Huawei Technologies Co., according to data compiled by Bloomberg.

Apple Supplier

In 2017, Apple said it would spend $390 million to fund Finisar’s laser technology, which is critical for iPhone features such as facial recognition. Finisar is one of a small group of optical parts makers that produce a so-called vertical-cavity surface-emitting laser, essential to burgeoning augmented reality technologies in smartphones. Apple uses it for features, such as an app where emojis mimic a person’s facial expressions. II‐VI has also been expanding its offering for that technology, and bought Kaiam Laser Ltd., a wafer-fabrication facility in the U.K., to increase its production capacity for the lasers last year.

The Details

The deal, approved by both boards, values Finisar at $26 per share, a 38 percent premium to the company’s closing price on Thursday. II-VI is expected to book $150 million of cost synergies within three years of the deal closing.Finisar’s stockholders will receive $15.60 in cash and 0.2218 shares of II-VI per share.The transaction is expected to close in mid 2019.

What the Companies Say

“We are confident that the growth potential for the combined company is substantial,” said Finisar Chief Executive Officer Michael Hurlston.“Disruptive megatrends driven by innovative uses of lasers and other engineered materials present huge growth opportunities for both of our companies,” said II-VI CEO Vincent Mattera.

(Updates with Finisar share price in second paragraph.)

To contact the reporter on this story: Giles Turner in London at gturner35@bloomberg.net

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Amy Thomson, Chitra Somayaji

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