Japan’s Denso Corp. and Mitsubishi Electric Corp. are teaming up to invest $1 billion in exchange for a quarter of Coherent Corp.’s silicon carbide business, according to people familiar with the matter.
(Bloomberg) — Japan’s Denso Corp. and Mitsubishi Electric Corp. are teaming up to invest $1 billion in exchange for a quarter of Coherent Corp.’s silicon carbide business, according to people familiar with the matter.
Denso and Mitsubishi will each invest $500 million and receive a 12.5% stake valuing the unit at about $4 billion, the people said, asking not to be identified because the matter is private.
Coherent will keep a 75% stake in the entity, which will be operated as an independent subsidiary, the people said. Coherent has the option to sell more in the unit and raise as much as $500 million within six months following the close of the deal, as well as sign additional supply agreements, they added.
Representatives for Coherent, Denso and Mitsubishi Electric declined to comment.
Mitsubishi Electric announced a previous electric vehicle supply partnership with Coherent earlier this year. Denso is a key supplier to Toyota Motor Corp.
Silicon carbide is more efficient than traditional silicon chips and has been used in some electric vehicles, including Tesla Inc. vehicles, to speed charging and extend range. EV makers are also looking for other less expensive materials, as well as alternatives for improving efficiency.
Coherent, based in Saxonburg, Pennsylvania, said in a filing in May that it was undergoing a strategic review of the business and was considering a minority investment by a strategic or financial partner as well as a joint venture and a sale.
Reuters reported last month that the unit was attracting interest from four Japanese companies, including Denso and Mitsubishi Electric.
Coherent’s shares closed trading Monday at $31, giving the company a market value of about $4.7 billion.
The company previously announced a 10-year, $1 billion commitment in the silicon carbide business so this transaction could help free it up for other investments. The company has more than $4 billion in total debt, according to data compiled by Bloomberg.
Coherent was acquired after a bidding war in 2021 by II-VI Inc., which renamed itself after the target following the deal’s closing a year later.
–With assistance from Nicholas Takahashi and Yuki Furukawa.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.