Applied Materials Inc scrapped its US$9.39 billion takeover bid for chipmaking equipment rival Tokyo Electron Ltd, becoming the second deal to fall apart in a week after opposition by the US Department of Justice (DOJ).
Proposed remedies from the two suppliers were not enough to allay regulatory concerns about the potential impact on competition, according to a statement yesterday. Applied Materials and Tokyo Electron separately announced plans to buy back stock.
Tokyo Electron and Applied Materials first announced plans to combine through an all-stock deal in September 2013, as a shrinking base of chipmakers makes the earnings of equipment suppliers more volatile.
The aborted deal comes after a decision on Friday last week by Comcast Corp to drop its US$45.2 billion offer for Time Warner Cable Inc after objections from the DOJ and the US Federal Communications Commission.
“Investors are disappointed. People expected the merger to create a market leader,” Ichiyoshi Asset Management Co executive officer Mitsushige Akino said.
“Now Tokyo Electron has to find a way to go it alone. If it doesn’t, we can expect the shares to fall,” Akino said.
Santa Clara, California-based Applied Materials announced plans to buy back US$3 billion of stock, while Tokyo Electron, with headquarters in Tokyo, plans to purchase ¥120 billion (US$1 billion) of its own shares, according to separate statements.
The companies make machines that prepare silicon wafers for imprinting with the circuits that turn them into processors capable of crunching numbers, showing video and connecting to mobile networks, among other tasks.
Intel Corp, Taiwan Semiconductor Manufacturing Co (台積電) and Samsung Electronics Co now buy the majority of the production machines deployed by the industry and are the top three customers of both companies, according to data compiled by Bloomberg.
“Based on the DOJ’s position, Applied Materials and Tokyo Electron have determined that there is no realistic prospect for the completion of the merger,” Applied Materials said.
Neither company is to pay termination fees.
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