Lumentum Holdings Inc. (NASDAQ:LITE) yesterday announced it has closed the $1.8 billion acquisition of Oclaro it announced this past March (see "Lumentum agrees to buy Oclaro for $1.8 billion"). The closing comes shortly after the company received clearance from Chinese antitrust authorities, the last major hurdle to completion of the deal (see “China clears Lumentum’s Oclaro acquisition”).
The acquisition significantly expands Lumentum’s component and optical transceiver portfolio and helps consolidate the component and subsystems space. The deal enables Lumentum to wrest the top spot in component and subsystems market share from Finisar – at least until Finisar’s planned merger with II-VI completes (see “II-VI to acquire Finisar for $3.2 billion”).
"I'm excited to close the acquisition and now move forward with realizing the strong potential of the combined company. The combined scale, resources, talent, and breadth of technologies will help us accelerate innovation and the development of the products our customers and network operators around the world need to handle the tremendous and unrelenting growth in network bandwidth," said Alan Lowe, president and CEO of Lumentum. "I am excited to welcome the talented Oclaro employees to Lumentum and want to thank Oclaro's management team for their leadership in getting us to this point today."
Ian Small, a member of Oclaro's board of directors, has joined the Lumentum board as part of the merger. How many, if any, other members of Oclaro’s leadership team will move to Lumentum remains unclear. Apparently Greg Doherty, Oclaro’s CEO, is headed elsewhere. "Completion of the transaction creates a powerful force in the optical industry and tremendous opportunity for employees, customers, and shareholders," said Dougherty. "It was a great pleasure to lead the Oclaro team, and I wish the new combined Lumentum team future success."
Lumentum did not immediately offer details of how it plans to integrate Oclaro’s portfolio or deal with product and personnel redundancies. Company management also did not offer new guidance for its fiscal second quarter 2019, although they did say they will provide information about Oclaro's contribution to the quarter when they hold that quarter’s earnings call. The call has yet to be scheduled. The company expects to derive an estimated $60 million in synergies in the next 12-24 months.
Oclaro stockholders will receive $5.60 in cash and 0.0636 of a share of Lumentum common stock for each share of Oclaro common stock they exchange. Lumentum and Oclaro believe it likely that the transaction will be fully taxable to Oclaro stockholders for U.S. federal income tax purposes, and therefore Lumentum will report the transaction as taxable. Lumentum came up with the funds for the buy via cash from the combined company balance sheets and $500 million from a new term loan.
Simon Leopold of Raymond James maintained his Strong Buy rating for Lumentum in a note issued yesterday. Lumentum’s stock was at $44.55, up 2.65%, in trading as of 11:55 AM Eastern today.
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