Applied Materials buys Tokyo Electron
APPLIED Materials Inc agreed to buy rival Tokyo Electron Ltd in an all-stock deal worth more than US$10 billion (RM32.2 billion), combining the No.1 and No.3 makers of chip-making gear as demand for their products slows and it gets tougher to turn a profit.
The deal, which analysts expect to hold up under scrutiny from antitrust regulators, aims to create a new company with a shared leadership team that is 68 per cent owned by Applied Materials shareholders, the companies said on Tuesday.
The value of the deal is worth US$10.16 billion, based on Tokyo Electron's issued shares, Applied Materials' latest stock price, and the agreed upon stock ratio, making it the second-largest acquisition by a foreign buyer in Japan, according to Thomson Reuters data.
Applied Materials shares finished nine per cent higher on the Nasdaq on Tuesday at US$17.45. Tokyo Electron's shares surged 13.2 per cent to 5,490 yen, yesterday.
Applied, Tokyo Electron and Dutch chip equipment maker ASML Holding NV are the three largest players in an industry that has consolidated as the rising cost of developing cutting-edge chips and slowing semiconductor demand forced alliances and acquisitions.
The combined market value of Applied and Tokyo Electron at the time of the announcement was around US$29 billion.
Most US chipmakers have sold off or mothballed capacity and outsourced manufacturing to Asian foundries such as Taiwan Semiconductor Manufacturing Co Ltd, further Applied's customer base.
The American company's net income has fallen steadily over the past two years and it posted losses in two quarters during that period. Tokyo Electron reported a 23 per cent drop in quarterly sales in July.
ASML bought US-based Cymer last year for about US$2.5 billion, while Lam Research Corp bought smaller rival Novellus Systems Inc for US$3.3 billion.
"When you look at the buyers of semiconductor equipment; when you look at the people who are really making very advanced chips these days, it's a very small number," Applied Materials' executive chairman Mike Splinter said. "Technology changes are getting more difficult and complex." Reuters