What happened
It isn't every day when a business receives $1 billion in financing for one of its operations. This happened to industrial company Coherent(NYSE: COHR) this week, and happy shareholders reacted by pushing the stock up in value. It rose by nearly 5% over the course of the week, according to data compiled by S&P Global Market Intelligence.
So what
On Tuesday, Coherent divulged that a pair of Japanese industrial companies, Mitsubishi Electric(OTC: MIELY) and Denso, will together invest $1 billion into its silicon carbide operation. The investment will be divided 50/50 between the two and give them each a 12.5% stake in the business.
The news comes several months after Coherent announced it was conducting a strategic review of the silicon carbide unit. With the Mitsubishi/Denso deal, it will be spun off into a Coherent subsidiary to be controlled by its parent (which is to hold the remaining 75% stake). The unit will continue to be led by Coherent's Executive Vice President of New Ventures and Wide-Bandgap Electronics Technology, Sohail Khan.
As part of the deal, Denso and Mitsubishi will sign long-term supply contracts with the unit for silicon carbide substrates and epitaxial wafers.
Now what
As the week came to a close, two analysts became more bullish on Coherent. B. Riley's Dave Kang went so far as to upgrade his recommendation on the stock to buy from neutral and raise his price target by $14 per share to $51. His peer Simon Leopold of Raymond James maintained his outperform (read: buy) rating, but lifted his price target to $42 from $35.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Coherent. The Motley Fool has a disclosure policy.
