Given the incredibly cyclical nature of semiconductor capital equipment spending and the growing power of a relatively small number of buyers, consolidation just makes sense. While Applied Materials (Nasdaq:AMAT) has been more active of late in buying companies, Lam Research (Nasdaq:LRCX) has stepped up in a big way with an offer for Novellus Systems (Nasdaq:NVLS).
The Deal
Lam announced that it had reached an agreement to acquire Novellus in a $3.3 billion all-stock deal. Lam will give 1.125 of its shares for each Novellus share - a deal which imputes a value of $44.42 per share for Novellus based on pre-announcement prices. That price is a 28% premium for Novellus, but only about 2.3 times trailing sales - a modest discount to historical multiples and a definite discount to the recent Applied Materials - Varian deal.
If the deal goes through as expected, Lam shareholders will own 58% of the combined company, and Lam intends to launch a $1.6 billion share repurchase to neutralize some of the impact of the deal. (For related reading, see The Merger- What To Do When Companies Converge.)
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