Lumentum and NeoPhotonics Merger Gets HSR Clearance

Lumentum Holdings Inc. (NASDAQ: LITE) and NeoPhotonics Corporation (NYSE: NPTN)  announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, related to the merger of both the companies, has expired.

This marks as a step in fulfilling one of the closing conditions of the transaction required by the merger agreement. The deal still requires certain approvals, including consent of NeoPhotonics’ stockholders and approval from the State Administration for Market Regulation of the People’s Republic of China.

Lumentum delivers innovative photonics to accelerate the speed and scale of cloud, networking, advanced manufacturing, and 3D sensing applications.

Meanwhile, NeoPhotonics is a leading developer and manufacturer of ultra-pure light lasers and optoelectronic products that transmit, receive and switch the highest speed-over-distance digital optical signals for Cloud and hyperscale data centers, internet content providers, and telecom networks.

Brief Recap

On November 4, Lumentum announced plans to acquire NeoPhotonics for $16 per share in cash, which represents a total equity value of about $918 million. The transaction is expected to close in the second half of calendar year 2022.

With this deal, Lumentum’s presence will expand into the fastest growing areas for optical components used in cloud and telecom network infrastructure. It is also expected to be immediately accretive to adjusted earnings and deliver more than $50 million in annual run-rate cost synergies within 24 months from closing.

Wall Street’s Take

Recently, JP Morgan analyst Samik Chatterjee maintained a Hold rating on Lumentum and raised the price target to $110 from $100. The new price target implies 12.8% upside potential from current levels.

Overall, the rest of the Street has a bullish outlook on the stock, with a Strong Buy consensus rating based on 8 Buys and 2 Holds. The Lumentum stock price prediction of $113.30 implies upside potential of about 18.02% from current levels.

Negative Investors Sentiment

TipRanks’ Stock Investors tool shows that investors currently have a Very Negative stance on Lumentum, with 16% of investors decreasing their exposure to LITE stock over the past 30 days.

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