Last year, the world's biggest maker of capital equipment used
for manufacturing semiconductors,
Applied Materials Inc.
) agreed to merge with Japanese semiconductor equipment maker Tokyo
Electron. The company has now announced that the combined company
will be called Eteris. It also revealed the logo of the new
In September last year, Applied Materials had declared that it will
merge with Tokyo Electron in a $9.39 billion all-stock deal to
create a new company, with predicted market value of $29 billion at
that point of time. While the proposed business combination has
been approved by shareholders of both companies, it is still under
antitrust review by several regulators. The declaration of the new
company's name and logo are the latest developments. The
transaction is expected to close by the second half of 2014.
The new company will be incorporated in The Netherlands, with
headquarters in both Tokyo and Santa Clara, CA. The stock of the
new entity will be listed on both the Nasdaq and the Tokyo Stock
Exchange. As per the deal, Applied shareholders will get one share
of the new company for every share that they hold, while Tokyo
Electron shareholders will get 3.25 shares for each of their
Both Applied and Tokyo Electron make machines that are used to
manufacture semiconductors, flat-panel displays and solar
photovoltaic products. The deal combining two major players in the
global chip industry will be one of the biggest tech mergers in
recent years. With its merger with Tokyo Electron Limited, Applied
Materials will further strengthen its leadership position in the
semiconductor capital equipment market.
The two equipment companies are aware of the changing needs of the
market, i.e. PCs giving way to mobile devices such as tablets and
smartphones; TVs getting more connected and increasing energy needs
driving the implementation of alternative energy sources such as
Developing new manufacturing technologies is a very expensive
process and equipment makers often need to get together for the
purpose. However, because of the merger, Applied will be able to
keep ownership in-house, which will enhance its competitive edge.
The deal is expected to be accretive to pro forma earnings in the
first full year of operation for the combined entity. Moreover,
cost synergies are expected to be $250 million by the end of first
fiscal year of operation and $500 million per annum within the
third year of operation.
Also, the company plans to start a share buyback program worth
$3 billion within a year after the transaction closes. In addition,
pooling the knowledge, resources and expertise of both the
companies will help to improve Eteris' technological advantage.
Applied shares currently have a Zacks Rank #3 (Hold). Other stocks
that are performing well include
). All these stocks carry a Zacks Rank #2 (Buy).
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