Takashi Amano Tokyo
Applied Materials, the largest chipmaking equipment supplier, has agreed to acquire Tokyo Electron for $9.4 billion (R93bn) in stock in the largest deal for a Japanese company from outside the country in six years.
Gary Dickerson, who became chief executive of Applied Materials on September 1, would be chief executive of the combined manufacturer, the companies said in a statement yesterday. Applied Materials shareholders would own 68 percent of the new entity.
Dickerson, who replaced Mike Splinter as chief executive, is moving to consolidate the industry across continents amid slowing demand for equipment used to prepare silicon during the early stages of chip fabrication. Last month Applied Materials forecast revenue that missed analysts’ estimates for the second consecutive quarter amid a record slump in the personal computer market and muted semiconductor demand.
“It’s a defensive strategy because research and development costs are going up and the number of customers is going down,” Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners in Singapore, said. “This tells you there’s a problem in the industry.”
Manufacturers are consolidating as production shifts toward semiconductors for cellphones and tablet computers that require more advanced equipment. Netherlands-based ASML Holding, Europe’s biggest chipmaking tools supplier, completed its e1.95bn (R25.9bn) purchase of San Diego-based Cymer in May to expand in extreme ultraviolet lithography technology.
Lam Research in 2011 agreed to buy Novellus Systems for about $3.3bn in stock, combining in a challenge to Applied Materials.
The Applied Materials offer values Tokyo Electron at 16.5 times earnings before interest, taxes, depreciation and amortisation, compared with the median of about 11 times for more than 60 similar deals, according to Bloomberg data.
Applied Materials shares have climbed 40 percent so far this year through Monday.
Tokyo Electron shareholders will get 3.25 shares for each share held in the Tokyo-based company, and chief executive Tetsuro Higashi becomes chairman of the new entity. Tokyo Electron, the second-largest maker of chip production machines, reported a ¥3bn (R298 million) loss for the three months to June.
“It’s best for major US companies and Japanese companies to join hands in terms of costs and technology platforms,” Higashi told reporters in Tokyo yesterday.
The deal, which the companies described as a “merger of equals”, values Tokyo Electron at about 6 percent more than yesterday’s closing price. Applied Materials shareholders will get one share in the new company for each they hold.
The purchase is the largest of a Japanese company from outside the country since Citigroup’s $8bn deal for a majority stake in Nikko Cordial in 2007. – Bloomberg