Lam Buys Novellus for $3.3 Billion
POSTED December 15, 2011
FREMONT -- Lam Research Corp. has agreed to acquire Novellus Systems of San Jose in an all-stock transaction valued at approximately $3.3 billion. The combined enterprise, which will retain the name of Lam Research Corp., will be a semiconductor equipment company with a broad portfolio of market-leading products and multiple opportunities to drive value creation through significant revenue and cost synergies. Total cost synergies are expected to be approximately $100 million on an annualized basis by the fourth quarter of 2013. In addition, Lam announced a $1.6 billion common stock repurchase program. This new program, which replaces Lam's existing share repurchase program, is targeted to be executed over the 12 months following the close of the transaction. Lam expects the transaction to be accretive to its non-GAAP earnings within one year after transaction close.
Lam Research and Novellus Systems are among the world's largest manufacturers of semiconductor equipment, both companies playing a pivotal role in defining the features and capabilities of next-generation devices. The two companies possess complementary product capabilities, with Lam's leadership in etch and single-wafer clean equipment aligning with Novellus's leadership in thin-film deposition and surface preparation technologies. The combined company will be well-positioned to lead the industry through critical technology transitions including 3D structures in advanced logic and NAND memory as well as the scaling to 450 mm wafers.
The combined company will also be positioned to grow revenue at a faster rate than either company could achieve individually by:
- Advancing technical benefits from owning adjacent technologies;
Under the terms of the agreement, Novellus stockholders will receive 1.125 shares of Lam Research common stock for each share of Novellus that they own, in a tax-free exchange. Based on the closing price of Lam's stock on December 14, 2011, the transaction values Novellus at a price of $44.42 per common share. Upon closing, Lam and Novellus stockholders will own approximately 59 percent and 41 percent, respectively, of the combined company.
Lam's $1.6 billion stock repurchase program will be funded from the combined company's existing on-shore cash and on-shore cash generation. Assuming completion of the stock repurchase program, this will essentially result in a total financial impact on the company as if the deal were structured with approximately 48 percent cash.
"This strategic combination positions Lam Research to lead the development of next-generation semiconductor manufacturing technology and productivity solutions at a time when growing semiconductor demand and increased device complexity are creating significant business opportunities," said Steve Newberry, vice chairman and chief executive officer of Lam Research. "Novellus's strong capabilities and market leadership in deposition and surface preparation technologies enable Lam to become more deeply entrenched in critical semiconductor manufacturing processes that are important to our customers. We believe the adjacency of our process technologies will provide significant technical benefits that will enable us to achieve greater success together and accelerate our growth."
Richard Hill, chairman and chief executive officer of Novellus, said, "We believe the combination of Lam and Novellus is great news for our customers, investors and employees. The complementary skills, technologies and product offerings of Lam and Novellus will create a strong platform for delivering innovative and cost-effective solutions. For our investors, it presents an ability to participate in the combined company's future value creation potential."
Martin Anstice, who, as previously announced, will assume the position of CEO of Lam Research from Steve Newberry effective January 1, 2012, will continue as CEO following the close of the transaction. He is currently Lam's president and chief operating officer. Timothy Archer, chief operating officer of Novellus, will become chief operating officer of the combined company; and Ernest Maddock, chief financial officer of Lam, will remain chief financial officer. The board of directors of Lam will add four new directors jointly nominated by Lam and Novellus.
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