Lumentum is losing the battle for coherence, and investors are cheering

Lumentum Holdings Inc. on Thursday it lost its battle to buy laser technology company Coherent Inc., but investors are cheering as if they have won the war.

Lumentum shares LITE,
+ 9.19%
charged 9.6% in noon trading, putting them on track for the biggest one-day gain of April 6, 2020.

Meanwhile, shares of II-VI Inc. IIVI,
which won the battle, fell 0.7%, resolving an earlier loss of as much as 7.7%.

Coherent share of COHR,
lost 0.6% because the deal with II-VI, which was slightly below Lumentum’s last revised bid, meant the bidding was finally over. Violation of the agreement with Lumentum also meant that Coherent was obliged to pay $ 217.6 million for the termination of the contract.

Lumentum’s latest offer marked for the third time that the company had to revise its offer to try to defend itself from II-VI, and involved a share offer that rose to $ 287.50, or 27% above the original offer which is coherent action estimated at $ 226.00 each.

Understandably, Lumentum investors seem happy that the contract has been terminated.

Shares of Lumentum fell 11.0% on January 19, when the cash and stock contract was first announced. And while investors awaited the outcome of Lumentum’s latest revised offer, shares closed Wednesday at the lowest price since Oct. 2 and 25.7% below the pre-closing price.

Shares also fell every day when Lumentum announced a higher bid to oppose bid II-VI: The stock fell 0.8% on March 10, fell 2.0% on March 17 and fell 3.5% on March 23.

FactSet, MarketWatch

Similarly, every time Coherent announced that II-VI had made an “unsolicited” takeover bid, II-VI investors scoffed: Shares fell 9.7% on February 12, fell 6.6% on March 12 , and March 18, 6.8%.

MKM Partners analyst Fahad Najam said that while winning the coherent battle could have provided a “significant long-term opportunity” to Lumentum shareholders, he disagreed with those on Wall Street that the company needed a job to add growth.

“[T]o Be clear, we do not share the opinion among some of the investment community that [Lumentum] follows this work due to the lack of an organic growth catalyst, ”Lease wrote in a recent note to clients. “We think reality can’t be further from this narrative.”

He stressed that the company has enjoyed “significant growth drivers” in the long run, as its optical communications business will benefit from growing bandwidth demand, and the Hyperscale Data Center 400G upgrade cycle should provide a boost in the short term.

Meanwhile, before the original merger agreement was announced, Lumentum shares rose 40.1% in the 12 months to January 15, while II-VI shares rose 141.8% and the S&P 500 SPX index,
+ 0.28%
advanced 14.6% at the same time.