II-VI acquires Swiss company for $115M
Optics maker II-VI Inc. acquired a Switzerland-based manufacturer of high-powered laser components in a cash deal valued at $115 million.
Saxonburg-based II-VI said Thursday that the purchase of the semiconductor laser business of Oclaro Inc. will broaden its product offerings into a fast-growing industry that serves customers in material processing, medical technology and telecommunications.
The company paid $5 million for an option to acquire Oclaro's amplifier and micro-optics business for $88 million in cash. The option expires in 30 days, II-VI said.
Avinash Kant, an analyst with D.A. Davidson & Co. in Lake Oswego, Ore., said in a note to investors that the deal presents a growth opportunity for II-VI. The company is likely to exercise its option to buy the two Oclaro units, he said.
“We believe the likelihood of this acquisition is quite high,” he said.
The deal will add $70 million in revenue for II-VI's current fiscal year, which ends June 30, 2014, the company said.
But Kant, who estimates II-VI revenue will be $669 million this year, said the company will have its profit margin decrease. The analyst noted that Oclaro's gross margins have been in the 9 percent to 13 percent range, while II-VI's margins average about 35 percent.
II-VI said it expects one-time acquisition costs to reduce earnings this year by 6 cents a share. Overall, the addition of the laser business will reduce this year's earnings by 8 cents to 12 cents a share, the company said.
The deal will begin adding to profit during II-VI's 2015 fiscal year, which starts July 1, the company predicted.
II-VI said it financed the deal with debt, replacing an existing $140 million credit line with a $225 million revolving credit line plus a $100 million term loan. It will begin making quarterly payments of $5 million on the term loan starting Oct. 1.
“We are able to handle this debt level,” Chief Financial Officer Craig Creaturo told analysts on a conference call. II-VI “generated $107 million in cash flow from operations last year.”
The laser business and its 200 employees will remain in Zurich but will be renamed II-VI Laser Enterprise GmbH, the company said.
While the deal was valued at $115 million by II-VI, the company paid $92 million in cash to Oclaro, which retained $15 million in accounts receivable. II-VI said it will hold back $6 million for 15 months, and $2 million was held back for potential working capital adjustments.
Francis Kramer, II-VI's CEO, said that his company and Oclaro's laser business served many of the same customers but II-VI did not make semiconductor lasers. The company's primary products are infrared laser optical elements.
“This acquisition is an integral part of II-VI's overall strategy, which is centered on a broad participation in laser systems across multiple applications,” Kramer said in a written statement. “We expect to increase the resources available to the (Zurich) team, enabling them to drive important new products for II-VI customers.”
The laser business purchase marks the fourth acquisition by II-VI in the last 10 months, and its second deal with Oclaro.
In December, it bought California optics maker LightWorks Optics Inc. for $31 million.
In November it made two deals, buying Oclaro's thin film filter business for $27 million and picking up Connecticut-based M Cubed Technologies Inc., an optics manufacturer, for $71.4 million.
Last month II-VI reported net income of $50.8 million on revenue of $558.4 million for its fiscal year ended June 30. II-VI shares closed down $1.62 at $19.01 Thursday.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.
Add Alex Nixon to your Google+ circles.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Overhaul possible for West Mifflin’s Century III Mall
- Chevron settles fatal shale well fire lawsuit, state claims for nearly $6M
- UPMC offering buyouts to 3,500 employees in cost-cutting move
- No end in sight for casino market saturation in northeastern U.S.
- Google adds HBO access, mobile payment to next version of Android
- Weak first-quarter economic report anticipated
- Task force to plot ways of easing gas glut in Pennsylvania via pipelines
- IRS cybersecurity breach touches lives of homebuyers, others
- Asian sell-off, Greece uncertainty rattle Wall Street
- Avago Technologies to pay $37 billion for chipmaker rival Broadcom
- Automakers do U-turn on infotainment systems