Applied Materials To Merge With Japanese Peer Tokyo Electron In All-stock Deal

(RTTNews) - Semiconductor equipment maker Applied Materials, Inc. (AMAT) agreed Tuesday to acquire Japanese peer Tokyo Electron Ltd. in an all-stock deal that values the combined entity at about $29 billion or 2.8 trillion yen. The deal will create a global company in semiconductor and display manufacturing technology.

The deal, which has the unanimous approval of the Boards of Directors of both companies, is expected to close in mid to second half of 2014.

"We are creating a global innovator in precision materials engineering and patterning that provides our new company with significant opportunities to solve our customers' high-value problems better, faster and at lower cost. We believe the combination will accelerate our momentum for profitable growth, increase the value we deliver to shareholders and create great opportunities for our employees," Applied Materials President and CEO Gary Dickerson said in a statement.

The companies noted that the deal brings together complementary leading technologies and products to create an expanded set of capabilities in precision materials engineering and patterning that are strategically important for customers.

The merged company will accelerate the existing strategic visions of both Applied Materials and Tokyo Electron, while boosting its opportunity to enable major, future technology inflections and advance customers' roadmaps in both semiconductor and display.

The deal, billed as a merger of equals, will see Tokyo Electron shareholders receive 3.25 shares of the new merged company for every share held, while Applied Materials shareholders will receive 1 share of the new merged company for every share held.

Following the closure of the deal, Applied Materials shareholders will own about 68 percent of the new merged company, while Tokyo Electron shareholders will own about 32 percent.

The closing of the deal is primarily subject to approval by shareholders of Applied Materials and Tokyo Electron as well as regulatory review.

The companies noted that Tokyo Electron Chairman, President and CEO Tetsuro Higashi will serve as chairman of the new merged company. Meanwhile, Applied Materials' Dickerson will serve as CEO, and CFO Bob Halliday will serve in the same role in the merged entity.

The merged company will have a eleven member board, made up of five nominees appointed by each company and one mutually agreeable additional director, with seven of them being independent directors.

The merged company will be incorporated in The Netherlands, having a new name, dual headquarters in Tokyo and Santa Clara, as well as a dual listing on the Tokyo Stock Exchange and the NASDAQ.

The companies expect to achieve $250 million in annualized run-rate operating synergies by the end of the first full fiscal year and $500 million to be realized in the third full fiscal year.

The deal is expected to be accretive to earnings per share for the merged company at the end of the first full fiscal year after closure. This will include the impact of a new $3.0 billion stock repurchase program targeted to be executed within 12 months following the closure of the deal.

"Today, we are launching a new company and taking a bold step forward for our industry. Built on a foundation of people, technology and commitment, we are creating a truly global company that we believe will expand the value we deliver to our customers and be able to achieve new levels of financial performance," Higashi stated.

AMAT closed Monday's regular trading session at $15.99, up $0.12 on a volume of 10.67 million shares.