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II-VI to buy Apple supplier Finisar in US$3.2b deal

[LONDON] II-VI Inc agreed to buy Apple Inc supplier Finisar Corp for US$3.2 billion in cash and stock, bringing together two firms focused on semiconductor lasers and optics.

The deal will give the companies a stronger position in technology used in "hyperscale" data centers, high-speed 5G infrastructure, 3-D sensing and driverless cars as well as access to larger markets, the firms said in a statement on Friday. Finisar shares rose 14 per cent to US$21.57 on Friday.

Pittsburgh-based II-VI focuses on designing and engineering industrial lasers as well as lenses, prisms, and other optical components, while Finisar, based in Sunnyvale, California, builds sensors that can be used in facial recognition, transceivers and other components for telecom networks and fiber-optic cables.

The merger brings together two companies that supply components for LiDAR, a key technology for the development of autonomous cars.

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The deal follows a rough summer for laser stocks - and optical components more broadly - amid concerns about tariffs and pricing pressure.

Finisar customers also include Apple, Cisco Systems Inc, Hewlett Packard Enterprise Co. and Huawei Technologies Co, according to data compiled by Bloomberg.

In 2017, Apple said it would spend US$390 million to fund Finisar's laser technology, which is critical for iPhone features such as facial recognition.

Finisar is one of a small group of optical parts makers that produce a so-called vertical-cavity surface-emitting laser, essential to burgeoning augmented reality technologies in smartphones. Apple uses it for features, such as an app where emojis mimic a person's facial expressions.

II-VI has also been expanding its offering for that technology, and bought Kaiam Laser Ltd, a wafer-fabrication facility in the UK, to increase its production capacity for the lasers last year.

The deal, approved by both boards, values Finisar at US$26 per share, a 38 per cent premium to the company's closing price on Thursday.

II-VI is expected to book US$150 million of cost synergies within three years of the deal closing.

Finisar's stockholders will receive US$15.60 in cash and 0.2218 shares of II-VI per share.

The transaction is expected to close in mid 2019.

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