TTM Buys The Lenses, Not The Power Meters

Two companies described the same transaction on 19 October and quoted two different multiples for it. TTM Technologies told its investors it was paying roughly 10.3 times the Ophir Optics business's expected fiscal 2027 adjusted EBITDA, before synergies. MKS told its investors it was selling at an estimated multiple of more than 18 times the same business's projected fiscal 2026 adjusted EBITDA. Both numbers are attached to the same $650 million in cash. Neither company is being coy; they are simply quoting different years, and the gap between those years is the entire argument for the deal.

Do the arithmetic the two releases invite and the implied figures are an EBITDA somewhere below $36 million this year and around $63 million next. Neither company states those numbers, and they should be read as what the stated multiples imply rather than as disclosed results. But the shape is unambiguous: the buyer is underwriting a business it expects to grow its earnings by something close to three quarters in a single year, and the seller is taking its money before that happens.

Ophir Optics makes high-precision infrared optics — thermal imaging lenses and assemblies for defence, homeland security and industrial customers, and optical components and beam-shaping optics for CO₂ and high-power fibre laser systems. It designs, manufactures and tests complete assemblies for land, air, maritime and unmanned platforms, with production in Israel and Romania. Inside MKS it sat in the Specialty Industrial market, which is to say outside the semiconductor and electronics-packaging businesses that MKS now treats as its core.

What is not being sold is the part most readers of this newsletter will have on a bench. Ophir Instruments — the laser power and energy meters, the beam profilers, the thermal sensor heads that sit in every laser lab in the world — stays with MKS. So does the Ophir brand itself. TTM is buying the lens factories and the people who run them; the badge on the power meter is not changing hands.

That split is cleaner than it looks on paper and harder than it looks in practice. The two halves of Ophir have shared a name, a Jerusalem origin and, for much of their history, a building. Separating a manufacturing business from the brand it was built under means a transition agreement, a renaming exercise, and a period in which customers who have bought "Ophir optics" for thirty years are buying the same lenses from a company that cannot call them that.

TTM is not an optics company. It is one of the larger makers of printed circuit boards and RF components in the world, and the nine months before this announcement have been the best in its history. Third-quarter sales, reported three days after the Ophir news on 22 October, were $1.2 billion — an all-time quarterly record, up 60 per cent year on year — with non-GAAP earnings of $1.46 a diluted share, adjusted EBITDA of $242.3 million at 20.1 per cent of sales, and a total book-to-bill of 2.13. Data centre and networking was 41 per cent of sales and grew 115 per cent. Aerospace and defence grew 21 per cent to $416.5 million, with a program backlog of $2.0 billion.

Read those two end markets together and the logic appears. TTM already sells into radar, electronic warfare and surveillance programmes, and into the drone and counter-drone work that has absorbed so much defence money in the last three years. What it sells into them is the electronics. An infrared imaging system is a detector, a signal chain, a board — and a lens, and the lens is both the most expensive single item and the one that determines what the system can actually see. Buying Ophir Optics moves TTM from supplying the box to supplying the thing that looks out of it.

On the industrial side the fit is narrower but real: Ophir's beam-shaping optics go into laser welding, cutting and PCB drilling, and PCB drilling is a process TTM runs at scale in its own plants.

MKS has been reshaping itself around semiconductors for several years, and the Ophir Optics disposal is consistent with that. The release says the sale will further strengthen the balance sheet, which in MKS's case is a statement with history behind it: the company has carried substantial debt since the Atotech acquisition, and $650 million in cash is a meaningful contribution to reducing it.

There is a pattern here that anyone in precision optics will recognise. Ophir Optronics was founded in Jerusalem in 1976, was bought by Newport in 2011 in a deal reported at around $230 million, and came to MKS when MKS bought Newport in 2016. Each owner has been a larger and more diversified industrial group than the last, and each has eventually decided that a specialist optics business fits somewhere other than where it had been put. The optics did not change. The strategic frame around them did, three times.

The deal closes in the second quarter of 2027, subject to regulatory approvals and government consents — plural, and worth noting, because the manufacturing is in Israel and the customers are defence ministries. That is a long gap in which an export-licensing authority can take an interest in a change of control.

TTM is also absorbing this while already leveraged. Net leverage stood at 2.8 times pro-forma adjusted EBITDA at the end of September following the Epiq acquisition, against a stated target range of 1.5 to 2.0 times which management expects to be back inside by the time Ophir closes. The purchase is to be funded from cash, future cash flow and the existing revolving credit facility, alongside a previously announced $400 million capacity expansion in Asia. None of that is alarming against a business whose preliminary 2027 guidance is $6.5–6.75 billion of sales, but it does mean the Ophir thesis has to work on schedule rather than eventually.

A $650 million cheque for infrared optics is a statement about where the margin in an imaging system now sits. For a decade the assumption in thermal imaging was that detectors were the scarce, high-value component and optics were a cost line — germanium, chalcogenide, a coating run, a mount. Cooled and uncooled detector supply has broadened since then, resolution has gone up, pixels have got smaller, and what now limits a system is whether the lens can deliver a diffraction-limited spot onto a 5-micrometre pixel from a gimbal on a drone, at f/1.8, over a zoom range, at weight.

That is an optics problem, and optics problems are solved by people with polishing machines, coating chambers and thirty years of infrared materials experience — which is what $650 million has just been paid for. For the independent optics shops watching this, the useful signal is not the price. It is that the buyer was an electronics company, and that it concluded it could not build what it needed.