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Finisar Acquisition | 3 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Finisar Acquisition |
Note 3. | Finisar Acquisition
On September 24, 2019 (the “Closing Date”), the Company completed its acquisition of Finisar Corporation (“Finisar”), a global technology leader for subsystems and components for fiber optic communications. Pursuant to the terms of the Agreement and Plan of Merger, dated as of November 8, 2018 (the “Merger Agreement”), Mutation Merger Sub Inc., a wholly owned subsidiary of the Company (“Merger Sub”), merged with and into Finisar (the “Merger”), with Finisar surviving the Merger. Each issued and outstanding share of Finisar’s common stock was automatically cancelled and converted into the right to receive the following consideration (collectively the “Merger Consideration”), at the election of the holder of the share of Finisar’s common stock:
| • | $26.00 in cash, without interest (the “Cash Consideration”),
| • | 0.5546 of a share of the Company’s common stock (the “Stock Consideration”), or
| • | a combination of $15.60 in cash, without interest, and 0.2218 of a share of the Company’s common stock (the “Mixed Consideration”).
The per share Cash Consideration and Stock Consideration were subject to adjustment pursuant to the terms of the Merger Agreement such that the aggregate Merger Consideration consisted of approximately 60.0% cash and approximately 40.0% shares of the Company’s common stock (assuming a per share price of the Company’s common stock equal to the closing price as of November 8, 2018, which was $46.88 per share) across all shares of Finisar’s common stock (the “Proration Adjustment”). Following the Proration Adjustment, the resulting consideration for Cash Consideration was adjusted to $15.94 in cash and 0.2146 shares of the Company’s Common Stock. No adjustment was made to the Stock Consideration and Mixed Consideration. The preliminary total fair value of consideration paid in connection with the acquisition of Finisar consisted of the following (in $000):
| Shares |  |  | Per Share |  |  | Total Consideration |
Cash paid for outstanding shares of Finisar common stock |  |  |  |  |  |  |  | $ |  | 1,879,086 |
II-VI common shares issued to Finisar stockholders |  | 26,712,822 |  | $ |  | 36.98 |  |  |  | 987,707 |
Replacement equity awards attributable to precombination service |  |  |  |  |  |  |  |  |  | 48,171 |
|  |  |  |  |  |  |  | $ |  | 2,914,964 |
The Company recorded $32.2 million of acquisition related costs in the three months ended September 30, 2019, representing professional and other direct acquisition costs. These costs are recorded within selling, general, and administrative expense in our condensed consolidated statement of earnings (loss). On the Closing Date, the Company entered into an Amended and Restated Credit Agreement, dated as of September 24, 2019 (the “New Credit Agreement”), by and among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders party thereto. Refer to Note 10 for additional information on the new credit facility. From the Closing Date, Finisar contributed $22.1 million of our consolidated revenue for the three months ended September 30, 2019. Excluding severance related costs, Finisar’s contribution to our net loss was a loss of $7.8 million during the three months ended September 30, 2019. The Company 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 significant estimates, especially with respect to intangible assets. Our preliminary allocation of the purchase price of Finisar, based on the estimated fair value of the assets acquired and liabilities assumed as of the Closing Date, is as follows (in $000):
|  |  | Purchase Price Allocation (Preliminary) |
Cash and cash equivalents |  |  |  | 842,764 |
Current assets |  | $ |  | 260,864 |
Inventories |  |  |  | 437,867 |
Property, plant & equipment |  |  |  | 748,858 |
Intangible assets |  |  |  | 827,689 |
Other assets |  |  |  | 82,624 |
Accounts payable |  |  |  | (123,707 | )
Other accrued liabilities |  |  |  | (148,425 | )
Deferred tax liabilities |  |  |  | (197,809 | )
Debt |  |  |  | (575,000 | )
Goodwill |  |  |  | 759,239 |
Total Purchase Price |  | $ |  | 2,914,964 |
The purchase price allocation set f orth herein is preliminary and will be revised as additional information becomes available during the measurement period, which cou ld be up to 12 months from the Closing D ate. Any such revisions or changes may be material. The Company utilized market available benchmarking analysis to perform the preliminary allocation above. As of September 30, 2019, the goodwill and intangibles have not been allocated to a segment, and remain within Unallocated and Other. The preliminary goodwill of $759.2 million arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining II-VI and Finisar. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. See Note 9 for additional information on goodwill and intangibles.

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