Coherent in talks with Japanese firms for silicon carbide investment-source

Sumitomo Electric Industries

22/09/2023 18:02

By Milana Vinn
       NEW YORK, Sept 22 (Reuters) - Coherent Corp  COHR.N , a
major U.S. supplier of materials used to make chips for the
automotive industry, has attracted interest from four Japanese
conglomerates for an investment in its silicon carbide business
at a valuation of as much as $5 billion, according to a person
familiar with the matter.
    The investment would alleviate the financial burden for
Coherent, which has said it will invest $1 billion over the next
10 years to expand its production of silicon carbide wafers,
which help boost the range of electric vehicles more than chips
made with traditional silicon. 
    Denso Corp  6902.T , Hitachi Ltd  6501.T , Mitsubishi
Electric Corp  6503.T  and Sumitomo Electric Industries Inc
 5802.T  have held discussions about taking a minority stake in
Coherent's silicon carbide business, the source said.
    Coherent may accept more than one of these companies as
investors in the silicon carbide division at a valuation of
between $4 billion and $5 billion, the source added, requesting
anonymity because the matter is confidential. No deal is
certain, the source cautioned. 
    Coherent, which said in May it would explore options for its
silicon carbide business, declined to comment. Representatives
for the Japanese companies did not immediately respond to
requests for comment.
    Chips made with silicon carbide are used in applications
that require huge amounts of power conversion, such as inverters
and drivetrains in electric vehicles. 
    Coherent, which has a market value of $4.3 billion and also
carries $4.3 billion in debt, also makes lasers and switches for
circuits.
    The Pittsburgh, Pennsylvania-based company said last month
that slower-than-forecasted recovery in China and its customers
downsizing their inventory were weighing on its business. Its
shares have dropped 22% in the last 12 months versus a 10% rise
in the S&P 500 Electronic Components Index. 

 (Reporting by Milana Vinn in New York; Editing by Andrea Ricci)
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