On November 3, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NeoPhotonics and Neptune Merger Sub, Inc. On August 3, 2022 (the “Closing date”), we completed the acquisition of NeoPhotonics through the consummation of the merger and, accordingly, we acquired all of the issued and outstanding common stock of NeoPhotonics. The addition of NeoPhotonics expands our opportunity in some of the fastest growing markets for optical components used in cloud and telecom network infrastructure. The integrated company is better positioned to serve the needs of a global customer base who are increasingly utilizing photonics to accelerate the shift to digital and virtual approaches to work and life, the proliferation of IoT, 5G, and next-generation mobile networks, and the transition to advanced cloud computing architectures.

We have applied the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, with respect to the fair value of purchase price consideration and the identifiable assets and liabilities of NeoPhotonics, which have been measured at estimated fair value as of the Closing date. The following tables summarize the total purchase price consideration (in millions):


	Fair Value
Cash consideration for outstanding NeoPhotonics common stock (1)	$	867.3
Settlement of pre-existing relationship (loan to NeoPhotonics) (2)	50.0
Stock-based compensation (3)	17.1
Total purchase price consideration	$	934.4

(1) Under the terms of the Merger Agreement, NeoPhotonics stockholders received $16.00 per share for each of the 54.2 million NeoPhotonics common stock outstanding at the Closing date. As a result, we paid $867.3 million of cash consideration to shareholders of NeoPhotonics on the Closing date.

(2) As contemplated by the Merger Agreement, on January 14, 2022, Lumentum and NeoPhotonics entered into a credit agreement where Lumentum agreed to make term loans (“loans”) to NeoPhotonics in an aggregate principal amount not to exceed $50.0 million to help fund capital expenditures and increase working capital associated with NeoPhotonics’ growth plans. During fiscal 2022, the Company funded a $30.0 million loan to NeoPhotonics. On August 1, 2022, we funded an additional $20.0 million loan to NeoPhotonics. The interest was payable monthly in arrears on the first day of each month. The loans would have matured on January 14, 2024, unless earlier repaid or accelerated. The $50.0 million loans in aggregate were included as part of the total purchase price consideration.

(3) We paid $22.6 million cash consideration to holders of vested NeoPhotonics equity awards as of closing, of which $13.6 million was allocated to the purchase price consideration and $9.0 million was expensed immediately after the Closing date. Additionally, we issued replacement equity awards (the “Replacement Awards”) in settlement of certain NeoPhotonics equity awards that did not become vested at the Closing date, with the total fair value of $40.2 million based on our closing stock price on the Closing date. The portion of Replacement Awards attributed to pre-merger service was recorded as part of the consideration transferred, which was $3.5 million.

The total transaction consideration of $934.4 million was funded by the cash balances of the combined company. We also recorded $28.7 million of merger-related costs, representing professional and other direct acquisition costs. Of the $28.7 million of merger-related costs, $8.3 million was incurred in fiscal year 2022 and $20.4 million was incurred in fiscal year 2023, which was recorded as selling, general and administrative expense in the consolidated statements of operations.

We allocated the fair value of the purchase price consideration to the assets acquired and liabilities assumed as of the Closing date based on their estimated fair values. The excess of purchase price consideration over the fair value of net assets acquired is recorded as goodwill. We have completed the purchase price allocation. Our final allocation of the purchase price consideration to the assets acquired and liabilities assumed as of the Closing date is as follows (in millions):



	Fair Value
Total purchase price consideration	$	934.4

Assets acquired
Cash and cash equivalents	$	92.9
Accounts receivable, net	66.8
Inventories	84.3
Prepayments and other current assets	24.2
Property, plant and equipment, net	106.1
Operating lease right-of-use assets, net	16.9
Other intangible assets, net (1)	412.5
Deferred tax asset	5.4
Other non-current assets	1.9
Total assets	811.0

Liabilities assumed
Accounts payable	79.6
Accrued payroll and related expenses	11.1
Accrued expenses	3.8
Other current liabilities	10.6
Operating lease liabilities, current	2.8
Operating lease liabilities, non-current	13.2
Deferred tax liability	38.3
Other non-current liabilities	32.5
Total liabilities	191.9

Goodwill	$	315.3

(1) Other intangible assets include customer relationship of $144.5 million, developed technology of $220.0 million, and in-process research and development (“IPR&D”) of $48.0 million. Refer to “Note 9. Goodwill and Other Intangible Assets”.

Goodwill has been assigned to the OpComms segment. Goodwill of $315.3 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 NeoPhotonics. None of the goodwill is expected to be deductible for local tax purposes. Refer to “Note 9. Goodwill and Other Intangible Assets.”

From the Closing date, NeoPhotonics contributed $340.4 million of our consolidated net revenue for the year ended July 1, 2023. Due to the continued integration of the combined businesses, as well as our corporate structure and the allocation of selling, general and administrative costs, it is impracticable to determine NeoPhotonics’ contribution to our earnings.

The following supplemental pro forma information presents the combined results of operations for the years ended July 1, 2023 and July 2, 2022, respectively, as if the merger was completed at the first day of fiscal 2022. The supplemental pro forma financial information presented below 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. The supplemental pro forma financial information does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position.

The pro forma financial information includes adjustments for: (i) additional amortization expense that would have been recognized related to the acquired intangible assets, (ii) additional depreciation expense that would have been recognized related to the acquired property, plant, and equipment, (iii) additional cost of sales related to the inventory valuation adjustment, (iv) acquisition related costs, such as third party transaction costs and restructuring costs, (v) stock-based compensation expense and (vi) the estimated income tax effect on the pro forma adjustments.

On August 15, 2022 (“IPG Closing date”), we completed a transaction to acquire IPG Photonics’ telecom transmission product lines (“IPG telecom transmission product lines”) that are used to develop and market products for use in telecommunications and datacenter infrastructure, including Digital Signal Processors (DSPs), ASICs and optical transceivers. This acquisition enables us to expand our business in the OpComms segment.

We have applied the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations to account for this transaction. The total purchase price of $55.9 million was paid in cash. We have completed the purchase price allocation. Our final allocation of the purchase price consideration includes $29.1 million of in process research and development (“IPR&D”), $8.6 million of developed technology, $2.3 million of customer relationships, and $5.0 million of other net assets and liabilities, resulting in goodwill of $10.9 million.

We also recorded $2.0 million of merger-related costs, representing professional and other direct acquisition costs. Of the $2.0 million of merger-related costs, $0.4 million was incurred in fiscal year 2022 and $1.6 million was incurred in fiscal year 2023, which was recorded as selling, general and administrative expense in the consolidated statements of operations.

The pro forma financial information from the acquisition of the IPG telecom transmission product lines, assuming the acquisition had occurred as of the first day of fiscal 2022, as well as revenue and earnings generated during fiscal 2023, were not material for disclosure purposes.