17 Mar 2016
Two of the world's largest laser companies set to merge; Rofin postpones potentially troublesome annual shareholder meeting.
News of the agreement, which would see Coherent make a significant move into the industrial laser sector, prompted Rofin to postpone the annual shareholder meeting that had been scheduled for March 17, and at which its existing board faced a challenge from activist investor SilverArrow.
At $32.50 per share, the acquisition price agreed by the two companies represented more than a 40 per cent premium on Rofin’s prior stock price – which rose accordingly after the deal was revealed - and the highest valuation since late 2011.
Coherent CEO John Ambroseo said in a joint statement: "The combination of Coherent and Rofin represents a unique opportunity to strengthen Coherent's position in materials processing."
While Rofin has always been much more focused on lasers for materials processing than the far more diversified Coherent, both companies have been working hard to develop high-power fiber lasers as the industrial sector moves away from carbon dioxide sources to adopt solid-state technology.
Together, they are likely to generate annual sales of around $1.3 billion, while the combined company will employ around 5000 staff before any headcount reductions take effect.
Alluding to the efforts to develop fiber lasers and mount a challenge to IPG Photonics, Rofin’s chairman Peter Wirth said: “[This combination] grows out of the successful technological and strategic transformation that Rofin has been undergoing…and the hard work of Rofin’s many talented professionals to execute our strategic plan."
In a joint presentation outlining the rationale behind the deal, Coherent highlighted the anticipated 16 per cent compound annual growth rate expected for the fiber laser sub-sector over the next few years, saying: “Coherent and Rofin will have a strong number-two position in the large and fast-growing fiber laser market.”
And whereas around half of Coherent’s current revenues relate to laser applications in microelectronics production, the addition of Rofin will make the combined entity much more evenly split between microelectronics and materials processing. Around 20 per cent of the combined revenues would relate to scientific and OEM sales.
Rofin CEO Thomas Merk expanded on that, saying: "Coherent and Rofin are highly complementary both technologically and geographically. Our two companies share similar cultures and we are excited for our customers and employees to benefit from the greater resources and growth prospects that come from being part of a larger organization."
While the combination of Rofin and Coherent should be largely complementary, Coherent reckons that it will be able to make annual cost savings of around $30 million within two years of the deal closing.
Research and development operations appear likely to be affected by that consolidation, with the US firm saying that it would “optimize” the combined R&D portfolio.
Coherent added that it would finance the transaction through a combination of cash on hand and a $750 million loan plus a revolving credit facility of up to $100 million agreed with Barclays Bank. According to its most recent quarterly financial statement, the laser company held around $336 million in cash and equivalents as of January 2.
The transaction is expected to close by the end of the calendar year, although it is still subject to approval by Rofin’s stockholders – of which is SilverArrow is the largest with close to a 10 per cent holding – as well as regulatory approvals in the US and other jurisdictions.