Laser manufacturer NeoPhotonics is being acquired by Lumentum in a bid by the Apple supplier to expand its presence in high-speed optical networks.
Lumentum (ticker: LITE) will pay NeoPhotonics (NPTN) stockholders $16 a share in an all-cash transaction. The deal is valued at about $918 million.
“With NeoPhotonics, we’re making another important investment in better serving our customers and expanding our photonics capabilities at a time when photonics are at the forefront of favorable long-term market trends,” said Alan Lowe, Lumentum president and CEO.
NeoPhotonics stock was soaring nearly 34% to $15.41 early Thursday. Shares of Lumentum dropped 1%.
The acquisition will accelerate Lumentum’s exposure to the growing $10 billion market for high-speed cloud and telecom network infrastructure. Executives expect it will generate more than $50 million in annual synergies within 24 months from the deal closing.
The deal is expected to close in the second half of 2022. In the meantime, Lumentum will provide up to $50 million in term loans to NeoPhotonics to fund anticipated growth.
Lumentum is Apple’s main supplier of the 3D sensors the tech giant uses in its Face ID technology. Earlier this year, Lumentum bought out laser competitor Coherent in a $5.7 billion deal amid an ongoing consolidation wave in the optical components industry. Lumentum acquired Oclaro in 2018.
Lumentum also reported fiscal first-quarter earnings on Thursday. Lumentum posted adjusted earnings of $1.79 a share on revenue of $448.4 million. Analysts were looking for profit of $1.55 a share on revenue of $439.5 million.
NeoPhotonics develops and manufactures lasers used to transmit and receive digital signals for the cloud, internet content providers and telecom networks. One of the company’s biggest customer was Chinese technology manufacturer Huawei, but the business took a hit in August 2020 when the Department of Commerce imposed restrictions on Huawei. In the last quarter before the restrictions, Huawei accounted for about $40 million of revenue.
The company has since made up for the loss, and reported earnings Thursday that beat analysts’ expectations. NeoPhotonics reported earnings of 1 cent a share on revenue of $83.7 million in its third quarter. Analysts surveyed by FactSet were expecting a loss of 4 cents a share on revenue of $79.9 million.
“The increasing global demand for our ultra-pure light tunable lasers and photonics technologies for speed over distance applications is more apparent than ever, and Lumentum is the ideal partner to serve our customers on a larger scale,” said NeoPhotonics CEO Tim Jenks.