Lam to Buy SEZ for $568M for Wet Clean Growth

| About: Lam Research (LRCX)

After the close Monday, Lam Research (NASDAQ:LRCX) announced a deal to acquire SEZ Group for $568 million in cash, about 40% higher than SEZ's closing price. The price represents about 45% of Lam's total cash balance, leaving it with about $725M. SEZ is the leading supplier of single-wafer wet clean tools, with about 40% market share, and about 60% market share for single wafer tools, its fastest growing segment. The deal is expected to close by Q108, and Lam sees it as neutral to slightly accretive in 2008, depending on synergies realized. "This transaction positions Lam Research and SEZ to revolutionize the increasingly important area of wafer cleaning, combining the world's largest single wafer installed base with Lam's emerging clean technologies, process integration capabilities and global scale," Lam CEO Steve Newberry said. Part of the microfabrication process involves cleaning wafers before each critical step, including wet processes in which chemicals remove contamination, particles and impurities.

In a note to clients, Citigroup analyst Timothy Arcuri wrote, "While M&A in this sector has been more often unsuccessful, we believe this is a good deal longer-term as LRCX has proven it can do well in a price competitive product segment and should also allow LRCX to be more strategic with R&D spend — which has cut into margins recently. Additionally, it suggests LRCX does not see business getting materially worse. Near-term, however, we would not be surprised if the stock trades down on the news."

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