Networking equipment manufacturer Lumentum Holdings (Nasdaq: LITE)’s acquisition of Hong Kong-based Cloud Light Technology is expected to more than double its cloud data center infrastructure revenue within 12 months. The approximate $750 million deal closed in November of 2023.
Cloud Light manufactures fiber optic equipment and automotive sensors. With the acquisition, Lumentum made a bold move to advance its position and to better serve cloud operators and AI infrastructure providers.
Complex Cross-Border Transaction
The deal involved a complex cross-border transaction. In order to complete the acquisition, the parties had to successfully navigate deal risks, including regulatory and tax risks, across multiple jurisdictions including the U.S., Hong Kong, China, Taiwan and the British Virgin Islands. Cloud Light had operations in multiple countries across Asia.
The deal was structured in a unique two-step process that allowed California-based Lumentum to acquire Cloud Light’s core business in a first phase and its Taiwan operations in a second phase a few months later.
The deal was long in the making. It followed conversations with a major U.S. cloud operator, a customer of both Cloud Light and Lumentum, who saw how the combination of the two companies could better serve it and other cloud operators and AI infrastructure providers. Discussions started in early spring of 2023 and definitive agreements were signed in late October 2023.
Employee Retention
The retention of employees was key for Lumentum. The negotiating parties worked collaboratively on a unique plan to implement broad-based changes to Cloud Light’s unvested equity awards. They did so in a way that would not require consent from all individual equity award holders so that employees would be properly incentivized and drive value for the combined business following closing.
For more Deals of the Year coverage, see Mergers and Acquisitions Names the 2024 Middle-Market Deals of the Year.
