(Reuters) – Lumentum Holdings said on Monday it would buy Hong Kong-based Cloud Light Technology for about $750 million, as the networking equipment maker looks to capitalize on growing demand for cloud computing.
Shares of the California-based company were up nearly 7% in premarket trading.
Cloud Light, which makes fiber optic equipment and automotive sensors, is expected to expand Lumentum’s opportunities in the cloud data center and networking infrastructure space.
Cloud computing providers such as Amazon.com, Microsoft and Alphabet’s Google are all racing to adapt their massive data centers for an era in which chatbots and other AI-backed services are drawing several users.
Last week, Microsoft’s cloud unit beat revenue estimates, displaying resilient demand for cloud-computing platforms across the sector.
Cloud Light, which was spun off from Japanese electronic components manufacturer TDK in 2018, generated about $200 million in revenue over the last year, Lumentum added.
Lumentum intends to finance the transaction, expected to close by the end of this year, through cash from its balance sheet. BofA Securities is its financial adviser.
The transaction is likely to be immediately accretive to Lumentum’s adjusted earnings per share, and is expected to more than double its cloud data center infrastructure revenue in the 12-month period following the close, the company said.
At the time of closing, the transaction amount would be paid in cash and the assumption and substitution of outstanding unvested Cloud Light options.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar)
