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. 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?
Aug. 13, 2012, 11:49 AMTop Japanese chip equipment maker Tokyo Electron (TOELF.PK) is buying U.S. peer FSI International (FSII +52.4%) for $6.20/share, or $252.5M, in cash. The price represents a 53% premium to FSI's Friday close. The deal, which will strengthen TEL's wafer surface preparation offerings, could be weighing a little on Lam Research (LRCX -1.4%), which bought Novellus partly for its surface preparation tech. (PR) | Comment!
Jan. 17, 2012, 5:57 PMPacific Crest upgrades Lam Research (LRCX +4.1%) to Outperform, seeing "little risk" that the company's deal to purchase Novellus (NVLS +3.6%) will fall apart and expecting shares to more fully reflect the value of the combined entity as the deal gets closer to its expected Q2 completion. Pacific also is confident in the ability of CEO Martin Anstice, the architect of the $3.3B deal. | Comment!
Dec. 15, 2011, 11:47 AMLam Research's (LRCX -3.7%) proposed acquisition (I, II) of Novellus (NVLS +21.1%) is giving a lift to several of the companies' peers, as investors hope the merger of the third and fourth largest U.S. chip equipment makers will spur further consolidation in the downtrodden industry. UTEK +5.8%. CYMI +4.1%. NANO +3.7%. KLIC +4.6%. ASMI +3.3%. AIXG +3.5%. MKSI +3.2%. | Comment!
Dec. 15, 2011, 10:58 AMLam Research (LRCX -3.2%) shares slide after yesterday's announcement of its Novellus (NVLS +21.7%) acquisition, but Needham's Ed Mok is a fan of the deal, upgrading LRCX to a Buy rating with a $46 target. He believes the combined company “will be substantially stronger" than the current Lam Research, in part by adding Intel as one of its customers. | Comment!
Dec. 14, 2011, 5:59 PMLam Research (LRCX) agrees to acquire Novellus Systems (NVLS) in an all-stock transaction valued at $3.3B. NVLS shareholders will receive 1.125 shares of LRCX for each of their shares, valuing NVLS at $44.42/share, or ~12.5% above its closing price today. Lam also announces a $1.6M common stock repurchase program. NVLS +10.2% before trading halted, LRCX -3% AH. | 1 Comment
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