Denso & Mitsubishi's $1B Coherent Silicon Carbide Venture

Denso, a prominent Japanese electronic components manufacturer, and Mitsubishi Electric have unveiled a substantial joint investment of $1 billion. This investment aims to secure a substantial 25% stake in Coherent Corp.'s silicon carbide business, a cutting-edge player in the fields of laser technology and photonics.

In a notable financial collaboration, Denso and Mitsubishi will each contribute $500 million towards this strategic venture, thereby acquiring 12.5% ownership in the silicon carbide division. The estimated value of this division stands at a remarkable $4 billion.

Key details suggest that Coherent Corp. will maintain the lion's share of 75% ownership within the division, which will continue its operations as an autonomous subsidiary. Additionally, a unique feature of this collaboration allows Coherent the flexibility to divest further equity within the division up to six months post-transaction. This maneuver has the potential to generate up to $500 million in capital. Furthermore, this collaboration may encompass additional supply agreements in the future.

In a prior development, Mitsubishi Electric recently announced a substantial partnership with Coherent in the electric vehicle supply segment. Meanwhile, Denso, a key supplier to Toyota, brings its wealth of expertise to this venture.

It is pertinent to note that Coherent Corp. disclosed in a document filed in May its intentions to undergo a comprehensive strategic review of its business. As part of this review, the company is open to considering minority equity investments from strategic or financial partners. Joint ventures and divestment options are also being explored. Notably, this strategic direction has garnered interest from a select group of Japanese corporations, including Denso and Mitsubishi Electric.