Business Combinations

12 Months Ended

Jul. 03, 2021

Business Combination and Asset Acquisition [Abstract]

Business Combinations

Note 4. Business Combinations

On December 10, 2018, we acquired all of the outstanding common stock of Oclaro, a provider of optical components and modules for the long-haul, metro and data center markets. Oclaro’s products provide differentiated solutions for optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, application virtualization and other bandwidth-intensive and high-speed applications. This acquisition strengthened our product portfolio, including gaining Oclaro’s indium phosphide laser and photonic integrated circuit and coherent component and module capabilities; broadens our revenue mix; and positions us strongly to meet the future needs of our customers.

Pursuant to the merger agreement, Prota Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Lumentum (“Merger Sub”), merged with and into Oclaro (the “Merger”), with Oclaro surviving the Merger. Each outstanding share of Oclaro common stock, par value $0.01 per share, was automatically converted into the right to receive the following consideration (collectively, the “Merger Consideration”), without interest:

•$5.60 in cash (the “Cash Consideration”) and;

•0.0636 of a share of Lumentum common stock, par value $0.001 per share (the “Exchange Ratio”)

The total fair value of consideration given in connection with the acquisition of Oclaro consisted of the following:

	Shares	Per Share		Total Consideration (in millions)
Cash paid for outstanding Oclaro common stock				$	964.8
Lumentum common shares issued to Oclaro stockholders	10,941,436	$	41.80	457.4
Replacement equity awards for Oclaro equity awards				2.7
Total consideration				$	1,424.9

The total transaction consideration was $1.4 billion, which was funded by the issuance of Lumentum common stock, new debt, and cash balances of the combined company. We also recorded $18.3 million in acquisition-related costs in the year ended June 29, 2019, representing professional and other direct acquisition costs. These costs were recorded within selling, general and administrative expenses and within interest and other income (expense), net in our Consolidated Statements of Operations. The Company also incurred $9.3 million of debt financing costs which has been recorded as a contra liability. Refer to “Note 12. Debt.”

The final purchase price allocation is as follows (in millions):

	Final As Adjusted June 29, 2019
Cash and cash equivalents	$	345.0
Accounts receivable, net	68.0
Inventories	155.0
Prepayments and other current assets	33.7
Property, plant and equipment, net	134.7
Intangibles	444.0
Deferred income tax asset	42.6
Other non-current assets	16.6
Accounts payable	(57.8)
Accrued payroll and related expenses	(11.4)
Accrued expenses	(8.3)
Other current liabilities	(6.1)
Deferred tax liability	(75.8)
Other non-current liabilities	(12.9)
Goodwill	357.6
Total purchase price	$	1,424.9

Goodwill and intangibles have been assigned to the OpComms segment. Goodwill of $357.6 million arising from the acquisition is attributed to the expected synergies, including future cost efficiencies, and other benefits that are expected to be generated by combining Lumentum and Oclaro. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. See “Note 10. Goodwill and Other Intangible Assets” for more information on goodwill and In-process research and development (IPR&D).

Supplemental Pro Forma Information

The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions we believe are reasonable under the circumstances.

The following supplemental pro forma information presents the combined results of operations for the year June 29, 2019, as if Oclaro had been acquired as of the beginning of fiscal year 2019. The supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets and property and equipment, adjustments to share-based compensation expense, the fair value adjustments on the inventories acquired, transaction costs, interest expense and amortization of the term loan debt issuance costs.

The unaudited supplemental pro forma financial information for the periods presented is as follows (in millions):

	Year Ended
	June 29, 2019
Net revenue	$	1,779.4
Net income	21.5