Coherent Stock Soars As Mitsubishi Electric, DENSO Pour In $1B - Here's More

Author: Nabaparna Bhattacharya | October 10, 2023 08:01am

Coherent Corp. (NYSE:COHR) shares are trading higher after the company clinched an investment worth $1 billion from Mitsubishi Electric Corp. (OTC:MIELF) and DENSO CORPORATION (OTC:DNZOF) in its silicon carbide business.

Under the transaction terms, DENSO and Mitsubishi Electric will each invest $500 million in exchange for a 12.5% non-controlling ownership interest in the business, with Coherent owning the remaining 75%.

The transaction will enable Coherent to increase its available free cash flow to provide greater financial and operational flexibility to execute its capital allocation priorities.

The company's gross debt was approximately $4.4 billion, and net debt was approximately $3.6 billion at the end of the fourth quarter. 

Prior to the completion of the transaction, Coherent will separate and contribute the business to a subsidiary. 

As part of the transaction, Coherent will establish long-term supply agreements with DENSO and Mitsubishi Electric to cater to their needs for 150 mm and 200 mm silicon carbide substrates and epitaxial wafers.

The electric vehicle market is expanding worldwide and is one of several emerging applications driving the exponential growth of silicon carbide power devices. 

"The investments from our strategic partners will be used to accelerate our capacity expansion plans and help sustain our leadership position, while ensuring the development of a robust and scalable supply for the rapidly growing market for SiC-based power electronics, largely driven by the explosive growth of the global electric vehicle market," said Dr. Vincent D. Mattera, Jr., Chair and CEO, Coherent.

Price Action: COHR shares are trading higher by 9.65% to $33.99 premarket on the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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