II-VI Incorporated (NASDAQ:IIVI) entered into a definitive agreement to acquire Finisar Corporation (NASDAQ:FNSR) from Summit Partners, L.P. and others for approximately $3.1 billion on November 8, 2018. Under the terms of agreement, Finisar's stockholders will receive, at the stockholder's election and subject to pro-ration, $26 in cash or 0.5546 of a share of II-VI common stock or a combination of 0.2218 of a share of II-VI common stock and $15.6 in cash for each Finisar share. On an average basis at the closing of the merger, 60% of the aggregate amount of Finisar's outstanding shares will be converted into the right to receive the cash election consideration, with the remaining 40% converted into the right to receive the stock election consideration. Each outstanding and unexercised option to Finisar common stock (whether vested or unvested) shall automatically be cancelled and terminated and converted into the right to receive an amount of mixed election consideration equal to the product of (i) the excess, if any, of the cash election consideration over the exercise price per share of such option multiplied by (ii) the number of shares of company stock subject to such option. Each performance RSU will vest as to a number of shares determined under the terms of the award and will be cancelled and extinguished and converted into the right to receive the cash election consideration, the stock election consideration or the mixed election consideration in accordance with the election made by the holder of such performance RSU. Each other award of Finisar RSUs that is outstanding and unvested will be assumed by II-VI and continue to be subject to substantially the same terms and conditions immediately prior to the effective time, except that the number of shares of parent common stock subject to such assumed RSU awards will be equal to the product of (i) the number of shares of Finisar common stock underlying such unvested RSU award as of immediately prior to the effective time multiplied by (ii) the sum of the (A) exchange ratio plus (B) the quotient obtained by dividing $15.6 by the volume weighted average price per share of II-VI common stock on NASDAQ for the ten consecutive trading days ending on the third trading day immediately prior to the effective time. Finisar shareholders would own approximately 31% of the combined company.

II-VI intends to fund the cash consideration with a combination of $709 million in cash on hand from the combined companies' balance sheets and $2 billion in funded debt financing underwritten by BofA Merrill Lynch, of which $450 million consists of revolver unfunded at close and $1975 million in New Term Loans. On March 4, 2019, II-VI entered into a new credit agreement to fund the purchase price. Pursuant to the terms and subject to the conditions therein, the new credit agreement provides for senior secured financing of $1.625 billion in the aggregate, consisting of (i) a five-year senior secured first-lien term A loan facility in an aggregate principal amount of $1.175 billion and (ii) a five-year senior secured first-lien revolving credit facility in an aggregate principal amount of $450 million. II-VI anticipates using the proceeds from the Term A Facility, together with a separately committed term B loan facility in an aggregate principal amount of up to $800 million and cash and short-term investments of II-VI and Finisar, to pay the cash portion of the merger consideration payable in connection with the merger and related fees and expenses. Upon completion, Finisar will operate as a wholly owned subsidiary of II-VI. Either of Finisar or II-VI may be required to pay a fee of $105.2 million in the event of termination of the transaction under certain circumstances.

Upon closing of the transaction, Vincent D. Mattera Jr. will continue to serve as President and Chief Executive Officer of the combined company. In connection with the closing of the transaction, three Finisar Board members will be appointed to the II-VI Board, which will be expanded to 11 Directors. The transaction is subject to approval by both Finisar and II-VI shareholders, expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, approval from Competition Council, Romania, receipt of other specified regulatory approvals, effectiveness of registration statement and the approval of the listing on NASDAQ of the shares of II-VI issuable in connection with the merger, entering into of a supplemental indenture between Finisar, II-VI and Wells Fargo Bank N.A. and other customary approvals. German Federal Cartel Office cleared the transaction on January 17, 2019. As of January 28, 2019, HSR waiting period expired with no second request. The filing is under review by the Romanian Competition Council and the Federal Economic Competition Commission and clearance is obtained for the transaction. The filing is under review by the State Administration for Market Regulation in China (SAMR). The agreement has been unanimously approved by the Boards of Directors of both Finisar and II-VI. As of March 26, 2019, shareholders of Finisar Corporation and II-VI Incorporated approved the transaction. As of April 23, 2019, Competition Council authorized the transaction. As of May 9, 2019, the transaction got regulatory approvals in Germany, Mexico and Romania. As of July 5, 2019, the deadline for Finisar stockholders to elect the form of merger consideration they wish to receive in the transaction has been set to be July 15, 2019. On September 20, 2019, II-VI Incorporated obtained antitrust clearance from the State Administration for Market Regulation of the People's Republic of China for the transaction. The transaction is expected to close in the middle of calendar year 2019. As on September 20, 2019, the transaction is expected to complete on or about September 24, 2019. The combined company expects to realize $150 million of run-rate cost synergies within 36 months of closing. The transaction is expected to drive accretion in non-GAAP earnings per share for the first full year post close of approximately 10% and more than double that thereafter.

BofA Merrill Lynch served as financial advisor to II-VI. D. Francesco Carloni, Allen R Bachman, Lauren Norris Donahue, Annette Mutschler-Siebert, Amigo Xie, Marion Baumann, Mark McMillan, Jeffrey W. Acre and John Blair of K&L Gates LLP served as legal advisors to II-VI. Barclays Capital Inc. served as financial advisor and provided a fairness opinion to Finisar. Finisar will pay Barclays a fee for its services, $1 million of which was paid upon the delivery of opinion. The remaining amount of the fee due to Barclays, currently estimated at approximately $25.4 million, will be payable by Finisar on completion of the transaction. David Makarechian and Noah Kornblith of O'Melveny & Myers LLP as legal advisors to Finisar. Sherrard, German and Kelly P.C. served as legal advisor to II-IV. Mohit Saraf and Vikrant Kumar of L&L Partners acted as legal advisors to II-VI. II-VI has agreed to pay BofA Merrill Lynch for its services in connection with the merger an aggregate fee currently estimated to be approximately $29 million, approximately $2 million of which will be payable in connection with delivery of its opinion and the remaining portion of which is contingent upon consummation of the merger. II-VI has engaged MacKenzie Partners Inc. as proxy solicitor and will be paid a fee of approximately $25,000. Finisar has engaged D.F. King & Co. Inc. to aid in the solicitation of proxies from brokers, bank nominees and other institutional owners for approximately $12,500. Cleary Gottlieb Steen & Hamilton LLP acted as legal advisor to BofA Merrill Lynch. Stephen M. Kotran and Stephen C. Childs of Sullivan & Cromwell LLP acted as legal advisors to Barclays Capital Inc. American Stock Transfer & Trust Company, LLC acted as exchange agent to II-VI Incorporated.

II-VI Incorporated (NASDAQ:IIVI) completed the acquisition of Finisar Corporation (NASDAQ:FNSR) Summit Partners, L.P. and others on September 24, 2019.