II-VI and Finisar – A Merger of Equals

LightCounting explores II-VI’s acquisition of Finisar in a new Research Note

It is not fun to be the second company in a crowded market; the urge to be first can be overwhelming. Finisar and II-VI found a solution by joining forces. II-VI Incorporated announced an agreement to acquire optical transceiver market leader Finisar on November 9, 2018, and LightCounting has published a Research Note exploring the ramifications of the deal for II-VI and the optical components industry.  Our key findings:

  • The acquisition of Finisar makes II-VI the top photonics player

  • Finisar products and internal technology complement the II-VI portfolio

  • The acquisition bolsters II-V’s effort to crack the 3D sensing market

  • II-VI’s total addressable market expands by $7.7 billion

  • It may take until mid-year 2019 or later for the deal to close

  • More deals may come, given the high premiums paid for Oclaro and Finisar

The deal values Finisar shares at a 37% premium over the market close on November 8, and has a value of $3.2 billion. The acquisition will be financed by a combination of $1 billion in cash, $2.0 billion in new debt, and $1.4 billion in new stock, and is subject to a variety of regulatory and antitrust approvals. The combined company will have annual revenues of almost $2.5 billion, 24,000 employees, and 70 locations.  II-VI posted GAAP net profit in the last four quarters, whereas Finisar did not. The Finisar acquisition is subject to regulatory approvals in the U.S., China, and possibly elsewhere, so the deal is unlikely to close before mid-year 2019.

II-VI acquired 15 companies over last 15 years, but Finisar is by far the largest. It puts the new company within reach of the top spot among photonics and compound semiconductor companies, as illustrated below.

Figure 1: Comparison of Photonics and Semiconductor companies

Source: Webcast Presentation of II-VI Incorporated

Finisar’s optical components products and technologies complement II-VI’s very well with little overlap, as shown in Table 1. Both Finisar and II-VI have 6-inch Gallium Arsenide wafer fabs, so some of the cost synergies may come from this area. 

Table 1: Finisar and II-VI product and technology synergies




Product group



Optical transceivers

Market leader



High port count

Low port count




980nm pump lasers


Market leader

VCSEL arrays for 3D

Top three player

Behind top three

Submarine components


Passives and EDFAs





6 inch, 4 inch fabs

Four fabs, 6 inch


two fabs, both 3 inch


Source: II-VI and Finisar

II-VI and Finisar have both invested heavily in catching up with Lumentum in the new market for VCSEL arrays for 3D depth sensing used for facial recognition in smartphones.  Finisar invested close to $100 million in a new 6” wafer VCSEL production fab and planned to have the new facility qualified by Apple by the end of 2018. With its recent acquisitions of EpiWorks and Anadigics, and now Finisar, II-VI will have the ability to produce VCSELs completely in-house, and in the high volumes required for the consumer market.  More information about the market for VCSEL arrays for 3D sensors in smartphones is available in LightCounting’s report: VCSEL Arrays in 3D Depth Sensing in Smartphones.

II-VI does not make or sell optical transceivers, so the acquisition of Finisar adds that $5.9 billion opportunity to II-VI’s total addressable market. In addition, Finisar’s VCSEL array capabilities greatly increase II-VI’s competitiveness in the 3D sensor array market, which LightCounting recently valued at $600 million for 2018, growing to $1.8 billion by 2023.  So in total, the addition of Finisar’s products, technologies, and capabilities opens up some $6-7 billion in new market opportunities for II-VI.

The 37% price premium being paid by II-VI over Finisar’s market share price is certainly attractive. Lumentum is paying 27% above the prior day market price for Oclaro. Lumentum’s stock price rose into the low $70’s shortly after the Oclaro acquisition was announced, and although it has since fallen to the $55-$60 range, it is still higher than the average in the quarter before the deal was announced.  With these attractive multiples other components companies must be considering if a merger/acquisition makes sense for them.

LightCounting subscribers can access full the research note here:





LightCounting is a leading optical communications market research company, offering semiannual market updates, forecasts, and state-of-the-industry reports based on its analysis of primary research with dozens of leading module, component, and system vendors as well as service providers and other users. LightCounting is the optical communications market’s first choice source for the accurate, detailed, and relevant information necessary for doing business in today’s highly competitive environment. For more information, visit: or follow us on Twitter at @LightCounting.