Investopedia: Applied Materials Gets Two For One With Varian

With Wednesday's announcement of its deal for Varian Semiconductor (Nasdaq:VSEA), Applied Materials (Nasdaq:AMAT) has to get full marks for a shrewd move and a surplus of chutzpah. It was just the other day when a major analyst downgraded Applied Materials on the basis of questions about the semiconductor equipment cycle. Clearly AMAT is playing with a longer-term horizon. 


The Deal
Applied Materials has reached a deal with Varian to acquire the company for $63 per share in cash. That is a total price of $4.9 billion or about $4.6 billion after netting out Varian's cash. At this price, Applied Materials is paying a 55% premium for Varian shares, and giving investors the best price these shares have ever seen (and a 29% premium to the consensus analyst target price, for the very little that is worth). (For more, see Mergers And Acquisitions: Understanding Takeovers.)

What Applied Materials is Getting
In many respects Applied Materials is getting two really interesting businesses in one deal. Varian is a leader in ion implantation systems, tools that basically build transistors on chips through doping. Varian has really benefited from an industry switch towards single-wafer processing and has built a roughly 75% market share in this business. In fact, Varian is well ahead of rivals like Axcelis (Nasdaq:ACLS) and Applied Materials quit this business years ago after finding it too difficult to get competitive traction. 



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