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Coherent acquires Rofin on eve of Rofin's shareholder meeting

Laser maker Coherent has bought Rofin-Sinar Technologies for $942 million. Coherent paid $32.50 per share, representing a 41.7 per cent premium on Rofin’s stock price as of 15 March.

The acquisition, announced on 16 March, meant Rofin postponed its 2016 shareholder meeting scheduled for the following day, a potentially explosive meeting because of the public row between Rofin and one of the company’s investors, Silver Arrow Capital Advisors.

The transaction, which will see Coherent move further into the industrial materials processing market, is expected to close within six to nine months, subject to approval by Rofin stockholders.

‘The combination of Coherent and Rofin represents a unique opportunity to strengthen Coherent’s position in materials processing,’ said John Ambroseo, Coherent’s president and chief executive officer. ‘The addition of Rofin’s complementary portfolio will build on Coherent’s capabilities as a world leader in laser and photonics-based technology and solutions, and create meaningful value for our stockholders.’

The combined company is likely to generate annual sales of around $1.3 billion; it will employ around 5,000 staff before any headcount reductions take effect.

The acquisition meant Rofin was able to postpone a potentially difficult 2016 shareholder meeting, which would probably have been dominated by the ongoing public dispute with Silver Arrow Capital Advisors (SAC). The investment firm, which owns nine per cent of Rofin, had been campaigning for members to be elected to Rofin’s board of directors, after criticising Rofin’s management strategy as a reason for what Silver Arrow felt was underperformance in Rofin’s stock over the past five years.

In the weeks leading up to the meeting, the Rofin and Silver Arrow had each issued several open letters urging stockholders to vote for their perspective candidates onto Rofin’s board.

A few days before the meeting was due to take place, Silver Arrow accused Rofin of covering up an embezzlement case, in which a former senior employee of the Rofin-Baasel subsidiary in the UK stole £2.5 million in 2015.

According to Silver Arrow, Rofin waited three months after discovering the embezzlement before pressing charges against the former employee. The investment firm also questioned Rofin’s decision not to disclose this information in its financial reporting.

Rofin responded the same day, on 14 March, stating that, ‘contrary to SAC’s claims, Rofin reported the incident to law enforcement immediately after discovering the rogue employee’s fraudulent actions and the accused individual was arrested the first working day after returning from vacation,’ and that the company is ‘working with the Crown Prosecution Services as it assembles its criminal case against the individual'.

Rofin went on to say that Silver Arrow had exaggerated the total amount that was embezzled by 25 per cent, and that the company had decided not to publicly disclose the matter after a consultation with its audit committee.

‘Silver Arrow’s accusations are a desperate last minute attempt to distract stockholders from the real issues surrounding this proxy contest,’ Rofin said in the statement.  

Silver Arrow then responded once more to say that Northampton Police, the authority in the UK handling the investigation of the crime, informed Silver Arrow's investigators that Rofin had uncovered the embezzlement in June 2015, but not reported it to the authorities until end of September 2015. The police force also reconfirmed that the amount believed to be embezzled was £2.5 million.

Commenting on Coherent’s acquisition of Rofin, Silver Arrow questioned whether the purchase price of $32.50 per share represents the best value to stockholders, suggesting a valuation in the high $30s to low $40s per share range.

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