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Coherent Acquisition
 12 Months Ended
Jun. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Coherent Acquisition Coherent Acquisition
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 Coherent, Inc., par value $0.01 per share (the “Coherent, Inc. 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, no par value (“Coherent Common Stock”).
Following the completion of the Coherent, Inc. acquisition, the Company announced a new brand identity, including a corporate name change to Coherent Corp. (NYSE: 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 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 $3 billion, and a new revolving credit facility (the “Revolving Credit Facility”) in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. For further information on the credit facility refer to Note 8. Debt.
In order to complete the funding of the Merger, we had a net cash outflow of $2.1 billion on July 1, 2022. We recorded $94 million of acquisition related costs in the year ended June 30, 2023 representing professional and other direct acquisition costs. These costs are recorded within SG&A expense in our Consolidated Statement of Earnings (Loss). Approximately 23 million shares of Coherent Common Stock in the aggregate were issued in conjunction with the closing of the Merger. Total Merger consideration was $7.1 billion, including replacement equity awards attributable to pre-combination service for certain Coherent, Inc. restricted stock units.
The total fair value of consideration paid in connection with the acquisition of Coherent, Inc. consisted of the following (in $000):
SharesPer ShareTotal Consideration
Cash paid for merger consideration——$5,460,808 
Shares of COHR common stock issued to Coherent, Inc. stockholders22,587,885$49.831,125,554
Converted Coherent, Inc. RSUs attributable to pre-combination service——82,037
Payment of Coherent, Inc. debt——364,544
Payment of Coherent, Inc. transaction expenses——62,840
$7,095,783 
The purchase price allocation set forth herein is final. We allocated the fair value of the purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require estimates, especially with respect to intangible assets, inventories, property, plant & equipment and deferred income taxes. In determining the fair value of intangible assets acquired, we must make assumptions about the future performance of the acquired business, including among other things, the forecasted revenue growth attributable to the asset group and projected operating expenses inclusive of expected synergies, future cost savings, and other benefits expected to be achieved by combining the Company and Coherent, Inc. Our intangible assets are comprised of trade names and trademarks, customer relationships, developed technology and backlog. We utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the purchase price allocation. The estimated fair value of the customer relationships and backlog are determined using the multi-period excess earnings method and the estimated fair value of the trade names and trademarks and developed technology are determined using the relief from royalty method. Both methods require forward looking estimates that are discounted to determine the fair value of the intangible asset using a risk-adjusted discount rate that is reflective of the level of risk associated with future estimates associated with the asset group that could be affected by future economic and market conditions.
Our final allocation of the purchase price of Coherent, Inc., based on the estimated fair value of the assets acquired and liabilities assumed as of the Closing Date, is as follows (in $000):
Final Purchase Price Allocation, As Adjusted
Assets
Current Assets
Cash, cash equivalents, and restricted cash$393,324 
Accounts receivable270,928
Inventories (i)562,884
Prepaid and refundable income taxes 4,832
Prepaid and other current assets 37,805
Total Current Assets1,269,773
Property, plant & equipment, net (ii)440,932
Deferred income taxes 236
Other assets106,388
Other intangible assets, net (iii)3,505,000
Goodwill3,174,984
Total Assets$8,497,313 
Liabilities
Current Liabilities
Current portion of long-term debt$4,504 
Accounts payable116,754
Accrued compensation and benefits58,631
Operating lease current liabilities13,002
Accrued income taxes payable 25,052
Other accrued liabilities 138,924
Total Current Liabilities356,867
Long-term debt22,991
Deferred income taxes 877,598
Operating lease liabilities43,313
Other liabilities100,761
Total Liabilities$1,401,530 
Final aggregate acquisition consideration$7,095,783 
(i) The Consolidated Balance Sheet has been adjusted to record Coherent Inc.’s inventories at a fair value of approximately $563 million. The Consolidated Statement of Earnings (Loss) for the year ended June 30, 2023 includes cost of goods sold of approximately $158 million related to the increased basis in the fair value compared to the carrying value. The costs were amortized over the expected period during which the acquired inventory was sold and thus did not affect the Consolidated Statements of Earnings (Loss) beyond twelve months after the Closing Date.
(ii) The Consolidated Balance Sheet has been adjusted to record Coherent Inc.’s property, plant and equipment (consisting of land, buildings and improvements, equipment, furniture and fixtures, and leasehold improvements) at a fair value of approximately $441 million. The Consolidated Statements of Earnings (Loss) have been adjusted to recognize additional depreciation expense related to the increased basis. The additional depreciation expense is computed with the assumption that the various categories of assets will be depreciated over their remaining useful lives on a straight-line basis.
(iii) Identifiable intangible assets consist of the following and are being amortized over their estimated useful lives in the Consolidated Statements of Earnings (Loss) (in $000):
 Fair ValueEstimated Useful Life
Trade names and trademarks$430,000 N/A
Customer relationships$1,830,000 15.0 years
Developed technology$1,157,500 13.5 years
Backlog$87,500 1.0 year
Intangible assets acquired$3,505,000 
Operating results, including goodwill and intangibles, of Coherent, Inc. are reflected in the Company’s consolidated financial statements from the Closing Date, within the Lasers segment. Revenues and net loss for the Lasers segment for the year ended June 30, 2023 were $1,469 million and $412 million, respectively. Goodwill in the amount of $3.2 billion arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining Coherent and Coherent, Inc. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes.
Supplemental Pro Forma Information
The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances.
The following supplemental pro forma information presents the combined results of operations for the years ended June 30, 2023 and June 30, 2022, as if Coherent, Inc. had been acquired as of July 1, 2021. The supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets, property, plant and equipment, adjustments to share-based compensation expense, fair value adjustments on the inventories acquired, transaction costs, interest expense and amortization of debt issuance costs related to the Senior Credit Facilities (as defined in Note 8. Debt).
The unaudited supplemental pro forma financial information for the periods presented is as follows (in $000):
Year Ended June 30, 2023Year Ended June 30, 2022
Revenue$5,160,100 $4,837,103 
Net Earnings (Loss)105,849 (289,615)