Lam Research Corp yesterday agreed to acquire KLA- Tencor Corp in a cash-and-stock deal valued at US$10.6 billion to create a semiconductor equipment company with about US$8.7 billion in sales.
KLA-Tencor shareholders can elect to receive US$32 in cash and 0.5 of a Lam Research common stock, in all-cash, all-stock or mixed consideration, according to a statement.
The offer values KLA-Tencor at about US$67.02 a share, or 24 percent more than the stock’s last closing price on Tuesday in New York.
Chipmakers and their suppliers have intensified their search for deals as slowing customer demand for products such as PCs and some smartphones puts fragile players under pressure.
A weaker global economy, especially in China, is undermining prospects for the industry.
Intel Corp, the world’s largest chipmaker, and Taiwan Semiconductor Manufacturing Co (台積電) are cutting back on plans to spend on plants and machinery, and refocusing investments on higher-growth areas.
Lam Research, based in California, said it will fund the cash consideration and repayment of KLA-Tencor’s outstanding term loan with about US$1.9 billion of cash on hand from the two companies and approximately US$3.9 billion in debt financing.
At US$10.6 billion, the offer is 28.9 times Milpitas, California-based KLA-Tencor’s full-year net income this year, compared with a median of 32.7 for 22 deals tracked by Bloomberg in the past year.
The combined company is to realize US$250 million in annualized cost savings in 18 to 24 months of closing the deal, expected in the middle of next year, Lam Research said.
It sees about US$600 million in additional annual revenue by 2020 from the combination.
Separately, Intel, the world’s biggest chipmaker, said it will invest as much as US$5.5 billion in its plant in Dalian, China, to convert the factory to production of memory chips.
The plant, which began operations in 2010, is to begin manufacturing the devices by the second half of next year, the Santa Clara, California-based company said on Tuesday in a statement.
Intel said it plans to invest as much as US$3.5 billion in the next three to five years, which might subsequently increase to US$5.5 billion.
Intel, which gets the majority of its sales from processors, has a joint-venture with Micron Technology Inc to produce memory chips — called NAND flash — that store data in mobile devices and increasingly in computers. By shifting computing from its reliance on magnetic disks to semiconductors for storage, Intel is trying to speed up data access and make laptops, servers and desktops more responsive.
In its most recent quarter, Intel said demand for memory chips helped offset weaker demand for PC processors.
Micron said that it is considering using supply from the upgraded plant and “could have a greater participation in the future.”
No formal decision has been announced, the company said in an e-mailed statement.
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