Oct. 21, 2015, 11:33 AM
- Up yesterday in response to Intel's flash manufacturing plans, chip equipment makers are higher today after Lam Research (LRCX +5.6%) announced it's buying KLA-Tencor (KLAC +22.5%) for $10.6B, with the goal of creating an industry giant on par with Applied Materials (AMAT +1%).
- In addition to Lam, KLA, and Applied, gainers include ASML (ASML +2.3%), Kulicke & Soffa (KLIC +2.9%), Teradyne (TER +4.6%), Mattson (MTSN +2.6%), and Xcerra (XCRA +2.3%). Ahead of the deal announcement, Tokyo Electron (OTCPK:TOELF) rose 4% in Tokyo, aided by the Intel news and a rally in Japanese equities.
- Lam/KLA assert the deal combines "Lam's best-in-class capabilities in deposition, etch, and clean [equipment] with KLA-Tencor's leadership in inspection and metrology." Gartner estimates Lam and KLA respectively had 9.4% and 6.4% of the 2013 chip equipment market. Applied (competes with both KLA and Lam) had 16.2%, ASML (dominant in lithography) 15.7%, and Tokyo 9.1%.
- Lam is paying the equivalent of $32/share in cash and 0.5 shares (current value of $37) for each KLA share. It plans to finance the deal with $1.9B in cash on hand from both companies, and $3.9B in debt. KLA shareholders can elect to be paid solely in cash, solely in stock, or through a mixture of cash and stock.
- The deal is expected to close in mid-2016. Lam CEO Martin Anstice will run the combined firm.
Jun. 8, 2015, 3:42 AM
- While mergers and acquisitions have accelerated sharply since the financial crisis, the government's pace for reviewing proposed deals is slowing.
- In such deal reviews concluded this year, more than 10 months elapsed, on average, between the transaction's announcement and a yes-or-no decision by the FTC or Justice Department. That's an increase from an average of seven months in recent years.
- Notables: Comcast's (NASDAQ:CMCSA) bid for Time Warner (NYSE:TWC) was pending for 14 months before it was dropped in April. Applied Materials (NASDAQ:AMAT) walked away from its deal to acquire Tokyo Electron (OTCPK:TOELY) 19 months after it was announced, while the FTC spent more than a year examining Sysco's (NYSE:SYY) planned acquisition of U.S. Foods before bringing a lawsuit against it in February.
Apr. 27, 2015, 2:00 PM
- Applied Materials (NASDAQ:AMAT) has tumbled towards $20 following news it has cancelled its planned $29B merger with Tokyo Electron, following a DOJ rejection of Applied/Tokyo's proposed remedies.
- The merger would've created a company that controlled about a quarter of global chip equipment spend, prior to any divestments. Several peers have rallied, perhaps aided by hopes they'll now be targeted.
- In an attempt to soften the blow, Applied has launched a new $3B buyback. It's good for repurchasing 11% of shares at current levels, and lasts through the third quarter of FY18.
- Stifel's Patrick Ho (Buy) is "surprised by the [DOJ's] ruling," given limited product overlap that could've been addressed via remedies. "In our view, persistent customer 'complaints' likely made it more difficult for regulators to approve the deal ... we believe that a great deal of focus has been placed on trying to complete this deal and while we believe Applied Materials is still well positioned to capitalize on these emerging industry inflections, there is a feeling of 'wasted energy' in this long tedious process..."
- Needham's Edwin Mok (Hold) thinks Applied is better off without Tokyo: He argues cultural differences would've limited operational synergies, thinks Tokyo has seen "accelerated share loss" since the 2013 merger announcement, and believes "AMAT alone is better leveraged to increased [etching/deposition equipment] intensity at the leading edge and is likely to see greater growth trajectory ahead."
Apr. 27, 2015, 3:24 AM
- Applied Materials (NASDAQ:AMAT) and Tokyo Electron (OTCPK:TOELY) said they will scrap plans for a merger that would have created a company with a market value of $29B, citing problems with the U.S. Department of Justice.
- The future of the deal was put into doubt earlier this year when the plan was delayed due to regulatory issues in several different countries.
Feb. 19, 2015, 11:54 AM
- South Korea's Fair Trade Commission plans to conditionally approve Applied Materials' (NASDAQ:AMAT) merger with Tokyo Electron (OTCPK:TOELF +5%). The regulator adds it's talking with peers in six countries (inc. the U.S. and Japan) to nail down details for approving a deal.
- A government official says Applied/Tokyo have agreed "not to launch combined chemical vapor deposition (CVD) and atomic layer deposition (ALD) businesses in Korea," and to also "establish new entities for fair competition, if necessary."
- The announcement comes after Samsung and SK Hynix had voiced objections to the deal, which stands to create a colossus possessing ~25% of the global chip equipment market. The DOJ was reported in December to be vetting a buyer for assets Applied/Tokyo plan to divest to win U.S. regulatory approval.
- Separately, Applied has filed proxy materials for its 2015 annual meeting (set for April 2). The company discloses CEO Gary Dickerson's compensation rose 59% in 2014 to $16.4M, thanks in part to a cash grant meant to avoid an excise tax that would apply to stock option awards following the closing of the Tokyo Electron deal.
Dec. 2, 2014, 6:52 PM
- The DOJ is "vetting a buyer of assets to be divested" by Applied Materials (NASDAQ:AMAT) and Tokyo Electron (OTCPK:TOELF) to win approval for their still-pending merger, TheStreet reports. The DOJ issued a second request for information back in Dec. 2013, three months after the deal was first announced.
- Meanwhile, the Korea Times has reported Samsung, originally opposed to the deal, is urging Korean regulators to approve it after forming a new partnership with AMAT related to next-gen memory chip technologies. Korean approval is deemed likely to arrive "sometime in March or April."
- Chinese and Japanese regulators also still have to vet the deal, which stands to create an industry giant. Morningstar observed last year Applied/Tokyo will have a 40% or greater share in six chip equipment markets.
- TheStreet observes Tokyo, whose shareholders will own 32% of the merged company, still traded at a 10% discount to the merger price as of Monday.
Oct. 29, 2014, 4:19 AM
- Tokyo Electron (OTCPK:TOELF), which is expected to be acquired by Applied Materials (NASDAQ:AMAT), has announced that the completion of their merger could take until next year due to delays in regulatory approvals.
- Applied Materials agreed to buy Tokyo Electron in September of last year in an all-stock deal worth more than $10B, combining the two makers of chip-making gear as demand for their products slowed.
Oct. 15, 2014, 2:43 PM
- Declaring Applied Materials' (AMAT -2.1%) recent selloff has made shares "very attractive," BofA/Merrill's Krish Sankar has upgraded the chip equipment giant to Buy, while reiterating a $25 target.
- Though bullish on the semi capital equipment cycle, Sankar argues Applied is "more of a restructuring story, making it cycle-agnostic in the intermediate term and not as susceptible to the noise around demand/yield."
- He sees the Tokyo Electron (OTCPK:TOELF) merger (still being pored over by regulators) potentially closing in Q1, and thinks the post-merger company will have normalized earnings power of $1.80/share, assuming the wafer fab equipment market is worth $31B - Gartner has forecast $30.8B in 2014, and $34.1B in 2015. That implies shares only trade at 10x-11x normalized EPS.
- Moreover, if the deal somehow fails to clear, Sankar only sees Applied falling to the $17-$18 range.
- The upgrade hasn't done much to lift Applied, which is following the market lower. CLSA upgraded the company last week.
Dec. 13, 2013, 2:50 PM
- Applied Materials (AMAT) discloses the DOJ has provided it with a request for additional info related to its planned merger with fellow chip equipment giant Tokyo Electron (TOELF). AMAT still expects the deal to close in mid-2014 or 2H14.
- Many have expected the Applied-Tokyo deal would face close scrutiny, given it stands to create a company with a dominant position in several chip equipment markets, and a total industry share (25.5% in 2012, per Gartner) roughly twice that of #2 ASML (12.8% 2012 share).
- Morningstar's Andy Ng notes Applied/Tokyo will have a 40% or higher share in six markets - including the key etch (46% 2012 share) and deposition (59%) markets, which are expected to see solid growth as chipmakers ramp production of 3D NAND flash memory and chips featuring 3D/FinFET transistors. Lam Research (LRCX +0.4%) is Applied/Tokyo's biggest rival in each market.
- Nonetheless, Ng argues chipmakers will back the deal, given the rising cost/complexity of chip manufacturing and the need for equipment vendors with huge R&D resources and diverse skill sets.
Sep. 25, 2013, 4:11 AM
- Applied Materials (AMAT) Executive Chairman Mike Splinter is confident that while regulators will take a "close look" at the company's proposed $7.1B acquisition of Tokyo Electron (TOELF.PK), the firm is "confident it will get approved."
- Splinter doubts that overlap between Applied Materials' and Tokyo Electron's product lines will be a problem. "Where we actually compete, there is very, very little overlap," Splinter said.
- Despite Splinter's optimism, top chip manufacturers such as Intel, Samsung, and TSMC could object to the deal.
- The companies believe that they'll gain three points in market share from the merger, as well as improve the supply chain, save money and become more efficient.
Sep. 24, 2013, 6:56 PM
- Given the huge market shares Applied Materials (AMAT) and Tokyo Electron (TOELF.PK) stand to have in a many chip/display equipment verticals post-merger, antitrust regulators are expected to closely scrutinize the $29B deal. Top chip manufacturers such as Intel, Samsung, and TSMC could be among those to object to it, at least in the absence of some asset sales.
- Gartner estimates Applied (14.4% share) and Tokyo (11.1% share) had over 1/4 of the global chip equipment market between them in 2012. ASML is assigned a 12.8% share, Lam Research (LRCX) 7.4%, and KLA-Tencor (KLAC) 6.5%.
- If the deal goes through, it should bring some tax benefits on account of the post-merger company's plans to incorporate in The Netherlands (ASML's home turf). A source tells the FT the combined company will have a tax rate of just 17%.
- Some analysts see the merger, like other recent deals, being motivated by the chip equipment industry's secular challenges. "It's all cyclical and no growth," remarks S&P's Angelo Zito.
- Unsurprisingly, Applied offers a more positive take, arguing demand for cutting-edge mobile chips and the industry's race to commercialize EUV lithography (expected in the second half of the decade) presents growth opportunities for companies with superior products. Pac Crest made a similar argument yesterday, while recommending Applied, KLA, and Lam.
- Gartner thinks chip equipment sales will fall 8.5% in 2013 to $34.6B after dropping 16.1% in 2012. But it also sees sales gradually rising to $49.1B in 2017.
- Previous: merger announcement, details
Sep. 24, 2013, 10:00 AM
- Applied Materials (AMAT +6.4%) continues to shoot higher after announcing a $29B all-stock merger with fellow chip/LCD equipment maker Tokyo Electron (TOELF.PK), a move that stands to create an industry behemoth. Among chip equipment peers, only ASML (ASML +1.4%) comes close to matching AMAT/Tokyo Electron in size.
- ASML and Lam Research (LRCX +2.1%) are up moderately in response to the deal, while KLA-Tencor (KLAC) is nearly unchanged. Tokyo Electron closed up 11.7% in Japan.
- Tokyo Electron had FY13 (ended March '13) revenue of ¥497.3B ($5.03B). Applied is expected to generate FY13 (ends Oct. '13) revenue of $7.53B.
- The combined company will have dual HQs in Tokyo and Santa Clara (there could be both integration and cultural challenges). Tokyo Electron chairman/CEO Tetsuro Higashi will be chairman, while new/well-respected Applied CEO Gary Dickerson will be CEO.
- Applied and Tokyo assert the merged company's unmatched materials engineering capabilities will give it an edge in the mobile chip and display equipment markets. The deal is expected to close in "mid to second half of 2014."
- The chip equipment industry has already seen plenty of consolidation; the Lam Research-Novellus and ASML-Cymer deals are two notable examples. Will Applied-Tokyo Electron fuel additional M&A activity?
Sep. 24, 2013, 6:38 AM
- Chipmaker Applied Materials (AMAT) will merge with Tokyo Electron in an all-stock combination that values the combined firm at $29B.
- "The combination will accelerate our momentum for profitable growth, increase the value delivered to shareholders and create great opportunities for employees," AMAT CEO Gary Dickerson says.
- The terms of the deal call for AMAT shareholders (who will own 68% of the new firm) to receive 1 share of the combined company for every AMAT share they hold.
- Run-rate operating synergies are expected to be $250M by the end of the first year and $500M in three years.
- Taking into account a planned $3B buyback, the deal will be EPS accretive at the end of the first fiscal year after closing. (PR)
- AMAT +3% premarket.
May 10, 2012, 8:37 AM
Applied Materials (AMAT +0.3%) plans to move its solar wafer manufacturing facilities to Asia from Switzerland as part of a restructuring of its environmental solutions ops, which comes in the midst of a solar-industry slump. Applied expects to record pretax charges of $70M-$100M over the next 1-1.5 years related to the restructure.| May 10, 2012, 8:37 AM
Aug. 23, 2011, 5:33 PMGerman chip equipment maker Aixtron (AIXG) rose 10% today on analyst speculation the company could be a buyout target due to the recent decline in its shares. One analyst suggests Applied Materials (AMAT) is a potential buyer, while another thinks the Chinese government could make a bid. | Aug. 23, 2011, 5:33 PM
May 4, 2011, 6:48 AM