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16 March 2016—Coherent Inc., one of the world’s largest purveyors of scientific, commercial and industrial lasers and associated technology, has entered into an agreement to acquire ROFIN-SINAR Technologies, a global developer and manufacturer of lasers and laser-based systems focused on the industrial materials-processing market. Under the deal, expected to close within six to nine months, Coherent will pay a cash price of US$32.50 per ROFIN share, for a total transaction value of US$942 million.

Accretive in a year

For Coherent, the transaction represents a big step in the company’s strategy of “increasing our scale and pursuing accretive growth opportunities,” according to the company’s president and CEO John Ambroseo, quoted in a press release. The company views ROFIN’s broad technology portfolio in the materials-processing realm, which includes solid-state lasers, fiber lasers, diode lasers and a variety of pulsed-laser and CO2-laser products, as complementary to Coherent’s existing capabilities.

The deal will dramatically expand the size of the Santa Clara, Calif. (USA)-based Coherent, which had total assets of US$969 million—roughly equivalent to the transaction’s price tag—as of the end of its September 2015 fiscal year. The company expects that the merger will start adding to the bottom line within a year after the deal’s closing, and that associated gains in efficiency, scale and R&D will produce “approximately $30 million in annualized run rate synergies” within a year and a half to two years after the transaction is completed. The company will finance the acquisition using existing cash reserves and new debt.

Big jump in ROFIN shares

News of the deal caused the price of ROFIN shares to pop up 44 percent, to US$33 apiece, and capped an eventful day for the German-based company. In the past year, ROFIN has been under pressure from Silver Arrow Capital, an investment firm with a substantial stake in the company, to make management changes, a situation that had developed into a proxy fight in advance of the company’s upcoming annual meeting. ROFIN began the day of the acquisition announcement by issuing an open letter to shareholders urging them to retain the current board. A subsequent release later in the day announced the postponement of the annual meeting to a later date that would coincide with approval of the proposed combination with Coherent.

The chairman of ROFIN’s board, Peter Wirth, stressed that the deal with Coherent “will deliver significant and immediate value for ROFIN stockholders.” Thomas Merk, ROFIN’s president and CEO, added that the combination should also benefit the customer base, by giving it access to a more diversified product line and deeper R&D resources in the combined company.

“Smooth transition” expected

“Our two companies share similar cultures,” Merk said in a press release, “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.” Coherent’s Ambroseo echoed the theme, pointing to his company’s “proven track record of successfully investing in, integrating and working alongside the businesses we have acquired.” Said Amboseo: “Given our shared cultures and focus on customers and innovation, we expect a smooth transition.”