Today, 10:37 AM
- KLA-Tencor (KLAC +3.1%), ASML (ASML +3.3%), Photronics (PLAB +2.5%), Ultratech (UTEK +1.4%), Xcerra (XCRA +1.9%), and Rudolph Technologies (RTEC +2%) are moving higher after Applied Materials (down 7.4%) abandoned its plans to merge with fellow chip equipment giant Tokyo Electron amid tough antitrust scrutiny. The Nasdaq is up 0.5%.
- Not counting divestments, Applied/Tokyo were expected to have ~1/4 of the chip equipment market post-merger, far above #2 ASML's ~15% and #3 Lam Research's ~9%. The unraveling of the deal could be fueling speculation Applied will turn its sights on another target.
- Rudolph reports after the close. KLA is 4 days removed from beating FQ3 estimates, reporting orders ($692M) near the high end of a $500M-$700M guidance range, and announcing plans to lay off ~10% of its workforce. FQ4 guidance was somewhat light: Revenue of $710M-$790M and EPS of $0.78-$1.02 vs. a pre-earnings consensus of $782.7M and $0.99. Orders are expected to total $550M-$750M.
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?
Oct. 17, 2012, 8:30 AMASML (ASML) agrees to acquire Cymer (CYMI) for €1.95B ($2.5B) in a cash and stock deal that will enable ASML to speed up the development of extreme ultraviolet (EUV) semiconductor lithography technology, which is critical for manufacturing the next generation of microchips. ASML issues new stock to Intel (INTC) and Samsung (SSNLF.PK) representing just over 9% of its share capital to help fund the takeover. (PR) | Comment!
ASML vs. ETF Alternatives
ASML Holding NV is a provider of lithography systems for the semiconductor industry, manufactures complex machines that are critical to the production of integrated circuits or chips. Its products include TWINSCAN, PAS 5500, Optics, among others.
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