Shares of Coherent, a manufacturer that produces wafers used for electric vehicles, experienced a 12% surge in their value after securing a significant investment. Two prominent Japanese automakers, Denso Corp. and Mitsubishi Electric, have collectively invested $1 billion in Coherent's silicon carbide business. This development has boosted Coherent's stock price to $34.69, marking a substantial recovery from its previous losses this year. Although shares have seen a slight decline of approximately 1% in 2023, this recent investment has generated renewed optimism.
Under the terms of the agreement, Denso and Mitsubishi Electric will each contribute $500 million, acquiring 12.5% stakes in the business. Consequently, this investment has propelled the overall valuation of Coherent's silicon carbide division to approximately $4 billion. Noteworthy to mention is that Coherent will retain the remaining 75% ownership and maintain the business as an independent subsidiary.
Additionally, Coherent has also established long-term supply arrangements with both Denso and Mitsubishi as part of the deal. This strategic collaboration will strengthen the existing partnership between these companies.
Coherent intends to utilize the funds from this investment to support its manufacturing operations over the next decade, ensuring continued growth and development.