California-based Lumentum Holdings Inc is the parts supplier to Apple Face ID technology.

Lumentum Holdings Inc, a laser and optical fiber specialist which analysts see as a supplier of parts supplier to Apple for it’s Face ID technology, is to acquire optical components producer Oclaro Inc for around $1.7 billion in a cash and stock deal.

California-based Lumentum said, the acquisition was aimed at broadening its portfolio of laser offerings and getting an edge in the fast-developing market for 3D sensing technology.

According to analysts covering this tech sector, Lumentum is the primary supplier of vertical-cavity surface-emitting lasers (VCSELs) that power Apple Inc’s Face ID feature in its premium iPhone X.

Lumentum Holdings’ offer price of $9.99 per share, consisting of $5.60 in cash and 0.0636 of its common stock, represents a premium of 27.3% to Oclaro’s closing price of $7.85 on Friday.

The acquisition is expected to generate more than $60 million in annual run-rate synergies within 12 to 24 months of its closing while immediately adding to Lumentum’s adjusted earnings per share (EPS), said both companies in a joint statement.

Lumentum intends to finance the deal through a combination of cash on hand from the combined companies’ balance sheets and $550 million in debt financing.

As for Oclaro, which produces optical components for the data center markets, it said its shareholders are expected to own around 16% of the combined company after the closure of the deal.

While Wilson Sonsini Goodrich & Rosati acted as legal counsel to Lumentum, Deutsche Bank Securities served as its financial adviser; Jefferies LLC was the financial adviser to Oclaro and Jones Day its legal counsel.

Oclaro’s shares were up by around 25% to $9.79 in premarket trading.