Coherent Acquisition

3 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

On July 1, 2022 (the "Closing Date"), the Company completed its acquisition of Coherent, Inc. (the “Merger”), a global provider of lasers and laser-based technology for scientific, commercial, and industrial customers, in a combined cash and stock transaction in accordance with the Agreement and Plan of Merger dated March 25, 2021 (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, each share of common stock of legacy Coherent, Inc. (“Legacy Coherent”), par value $0.01 per share (the “Legacy Coherent Common Stock”), issued and outstanding immediately prior to July 1, 2022, was canceled and extinguished and automatically converted into the right to receive $220.00 in cash and 0.91 of a share of Coherent's Common Stock.

Following the completion of the Legacy Coherent acquisition, the Company announced a new brand identity, including a corporate name change to Coherent Corp. (Nasdaq: COHR) on September 8, 2022.

On the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a new term loan A credit facility (the "Term A Facility") in an aggregate principal amount of $850 million a new term loan B credit facility (the "Term B Facility") (and, together with the Term A Facility, the “Term Facilities”) in an aggregate principal amount of $2.8 billion, and a new revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $350 million, including a letter of credit sub-facility of up to $50 million. For additional information on the credit facility refer to Note 8. Debt.

In order to complete the funding of the Merger, the Company had a net cash outflow of $2.1 billion on July 1, 2022. The Company recorded $62 million of acquisition related costs in the three months ended September 30, 2022, representing professional and other direct acquisition costs. These costs are recorded within SG&A expense in our Condensed Consolidated Statement of Earnings (Loss). Approximately 23 million shares of Coherent's common stock, no par value ("Coherent Common Stock") in the aggregate were issued in conjunction with the closing of the Merger. Total preliminary Merger consideration was $7.1 billion, including replacement equity awards attributable to pre-combination service for certain Legacy Coherent restricted stock units.

The preliminary total fair value of consideration paid in connection with the acquisition of Coherent, Inc. consisted of the following (in $000):


	Shares	Per Share	Total Consideration
Cash paid for merger consideration	—	—	$	5,460,808
Shares of COHR common stock issued to Legacy Coherent stockholders	22,587,885	$49.83	1,125,554
Converted Legacy Coherent RSUs attributable to pre-combination service	—	—	82,037
Payment of Legacy Coherent debt	—	—	364,544
Payment of Legacy Coherent transaction expenses	—	—	62,840
			$	7,095,783

The Company allocated the fair value of the preliminary purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess preliminary purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets, property, plant & equipment and deferred income taxes.

The purchase price allocation set forth herein is preliminary and will be revised as third party valuations are finalized or additional information becomes available during the measurement period, which could be up to 12 months from the Closing Date. Any such revisions or changes may be material. The Company utilized market available benchmarking analysis to perform the preliminary allocation.

Our preliminary allocation of the purchase price of Legacy Coherent, based on the estimated fair value of the assets acquired and liabilities assumed as of the Closing Date, is as follows (in $000):



	Allocation as of 7/1/2022
Assets
Current Assets
Cash, cash equivalents, and restricted cash	$	393,324
Accounts receivable	270,928
Inventories (i)	497,345
Prepaid and refundable income taxes	8,869
Prepaid and other current assets	41,467
Total Current Assets	1,211,933
Property, plant & equipment, net (ii)	424,228
Deferred income taxes	1,115
Other assets	102,726
Other intangible assets, net (iii)	2,425,454
Goodwill	4,005,727
Total Assets	$	8,171,183
Liabilities
Current Liabilities
Current portion of long-term debt	$	4,504
Accounts payable	116,754
Accrued compensation and benefits	60,596
Operating lease current liabilities	13,002
Accrued income taxes payable	16,936
Other accrued liabilities	136,042
Total Current Liabilities	347,834
Long-term debt	22,991
Deferred income taxes	563,824
Operating lease liabilities	43,313
Other liabilities	97,438
Total Liabilities	$	1,075,400

Preliminary aggregate acquisition consideration	$	7,095,783