Richard Hill, Novellus:
Novellus Systems Bought for $3.3B
December 15, 2011
Lam
Research has entered into a definitive merger agreement to acquire
Novellus Systems in an all-stock transaction valued at approximately
$3.3 billion. The combined enterprise, which will retain the name of Lam
Research, will be a semiconductor equipment company with a broad
portfolio of 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;
Optimizing and accelerating
collective development of next-generation tools; and
Further developing
complementary customer relationships.
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.
Anstice said, "We are excited to join forces with a remarkable company
like Novellus. We believe that the people, products and technology that
Novellus brings to Lam Research will position the combined company to
accelerate revenue and earnings growth, realize significant operating
efficiencies, and deliver stockholder value. Together, we believe that
we will be able to optimize technology and product roadmaps, strengthen
our competitive position in the market, and leverage complementary
customer relationships to accelerate growth."
The closing of the transaction is subject to customary conditions,
including approval by Lam's and Novellus's stockholders and review by
U.S. and international regulators. The companies expect the transaction,
which has been unanimously approved by both Lam's and Novellus's boards
of directors, to close in the second calendar quarter of 2012.
