Coherent Corp shares jumped on Tuesday following the announcement of a substantial $1 billion investment into its silicon carbide business from two Japanese manufacturers.
Denso Corporation and Mitsubishi Electric Corp will each contribute $500 million, the company said in a press release.
The strategic investment agreement entails both companies acquiring a 12.5% non-controlling stake in Coherent's silicon carbide business, valuing the unit at $4 billion.
Denso Corporation is a leading global automotive components manufacturer known for producing a wide range of automotive parts and systems. Mitsubishi Electric specializes in manufacturing diverse electrical and electronic products, including consumer electronics, industrial automation systems, information and communication technologies, energy and electrical systems, and automotive components.
Coherent will maintain a majority ownership of 75% and will operate the business as a distinct subsidiary. Long-term supply agreements are also part of the deal, further solidifying the partnership.
The silicon carbide wafers produced by Coherent's business are pivotal components for electric vehicles (EVs), enhancing charging efficiency and extending vehicle range.
The injection of funds will enable Coherent to expand its manufacturing capacity, meeting the rising demand for these critical components in the rapidly growing EV market.
Coherent's strategic review process, initiated earlier this year, has culminated in this significant investment, positioning the company for substantial growth and strengthening its role in the expanding SiC materials market.
Shares of Coherent were up nearly 9.8% by midday Tuesday in New York.