Tokyo Electron Ltd’s shares soared yesterday on news of a multibillion-dollar merger between the Japanese chip and panel giant and US-based rival Applied Materials Inc.
Investors cheered the corporate marriage announced on late Tuesday to create a US$29 billion firm, which the companies said would slash costs and better meet customer needs on the back of surging demand for mobile gadgets, such as smartphones and tablet computers.
The deal is schedule to close next year pending regulatory approval, they said.
Tokyo Electron’s stock finished 13.19 percent higher at ￥5,490 on Japan’s biggest stock exchange, with the US firm’s shares up about 9 percent on Wall Street overnight.
However, the merger appeared more like a takeover by Applied Materials, with the US firm’s shareholders to own about 68 percent of the new company, while 32 percent would go to Tokyo Electron stockholders.
The merged firm’s headquarters will be located both in Santa Clara, California, and Tokyo, but it will be incorporated in the Netherlands, reportedly part of a bid to shrink its tax bill.
Efforts to paint the deal as a merger of equals may have been aimed at selling the tie-up in Japan where foreign takeovers of domestic firms — particularly a major corporate name such as Tokyo Electron — are extremely rare.
The rivals, which produce tools to make semiconductors and display panels, count US-based chip giant Intel Corp and South Korea’s Samsung Electronics Co as customers.
Nomura Securities analyst Tetsuya Wadaki said the merger could give both firms more muscle in negotiating deals with clients.
Semiconductor production equipment makers “have been seeking to change their business model to one based on services/maintenance or the collection of fees, from one based only on the sale of equipment,” Wadaki told Dow Jones Newswires.
“The burden of negotiating this change to the sales platform with customers has become too great for any one company to bear on its own,” he said.