Coherent/Rofin: One Last Small Regulatory Approval


On March 16, 2016, Coherent (NASDAQ: COHR) annouced that it was acquiring Rofin-Sinar (NASDAQ: RSTI) for US$32.50/share. Now in the last finish line, the deal seems like a relatively easy win.

The transaction had a few milestones to hit on the road map, including shareholder vote and some regulatory approvals. Now that the vote has taken place and Coherent received clearance from the US regulator to acquire Rofin-Sinar, the only thing left to do is getting approval from the European Commission.

I don’t believe that there will be any significant hurdle in doing so. Looking at the Coherent’s acquisition investor presentation and Rofin’s annual report, one can learn that the two companies have little product overlap in Rofin’s main business area (Laser Macro Products). The annual report also mentions that the market is very fragmented, and that the two companies do not compete directly in the market, all good things when it comes to antitrust assessment.

So why has the US approval come through already, and not the European one? No one can be sure, but in the deals I’ve looked at, Europe has often be slower than America to assess deals, and I do hope that bar a surprising outcome, the approval should come by the end of September or even better, within the next 30 days. That’s only a guess on my part however so don’t hold me to it!

In any event, I am now holding Rofin’s shares. Since the deal is all-cash, there is nothing else to do but wait for the final verdict. I am expecting a 10-12% annualized return on it.
Thanks for reading and good trades!

Disclosure: Long Rofin-Sinar.

This article expresses an opinion and the author does not receive compensation for it and has no business relationship with any company whose stock is mentioned in this article; do your own due diligence before making investment decisions.

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