Lumentum Holdings Inc. is in advanced talks to buy laser maker Coherent Inc., according to people familiar with the matter, in a deal that would combine two companies whose products are used in everything from laser eye surgery to semiconductor manufacturing.
A cash-and-stock deal could come together as soon as this week, assuming the talks don’t fall apart, the people said. Exact terms couldn’t be learned but Coherent had a market value of $3.7 billion as of Friday’s close, while Lumentum’s was $8 billion.
Santa Clara, Calif.-based Coherent makes lasers and related products used in medical and scientific equipment, industrial applications and semiconductor manufacturing. It was founded in 1966.
Milpitas, Calif.-based Lumentum primarily makes optical components used in cloud networking, data transmission and submarine communications. It also has a lasers segment with offerings used in sheet metal and circuit board manufacturing. It became a stand-alone company in 2015 when it was spun off from JDS Uniphase Corp.
Lumentum’s shares have risen about 40% over the past year, while Coherent’s fell about 10% over the same period, compared with the S&P 500’s 17% rise.
Bringing the companies together could afford cost-cutting opportunities and allow them to combine resources to meet increasingly complex customer needs.
A wave of consolidation among chip makers and related companies was already under way when the coronavirus pandemic accelerated demand and helped prompt a string of large semiconductor deals in the second half of last year.
Coherent tapped former McKinsey & Co. senior adviser and Diebold Nixdorf AG chief Andreas Mattes as chief executive in April. In August it said its chief financial officer, Kevin Palatnik, planned to retire by March 2021 and that it would launch a search for his successor. In December, Coherent entered into a supply agreement with another optical material manufacturer, II-VI Inc., for automotive and electrification welding.