Following the receipt of regulatory approval,
Lam Research Corp's
) merger with
Novellus Systems Inc.
) will finally close after trading hours on June 4, 2012.
Both companies had already received their shareholder approvals
for the deal on May 10. The merger will allow Novellus shareholders
to receive 1.125 shares of Lam stock for each Novellus share.
Although initially priced at around $3.3 billion, the value has
deteriorated slightly because of the nearly 7% decline in Lam's
prices since the deal was announced. With approximately 72 million
shares outstanding at Novellus, the deal price has fallen to just
under $3 billion at Lam's closing share price on Friday.
The agreement gives Lam shareholders a 59% share of the combined
entity, which retains the name Lam Research Corp. The remaining 41%
will go to Novellus shareholders. Additionally, Lam's CEO and
president, Martin Anstice, will continue as the CEO of the merged
Since both companies complement each other in many respects, we
do not expect too many issues during the integration period. Most
importantly, they sell complementary front-end equipment, wherein
Novellus specializes in thin-film deposition and surface
preparation equipment, while Lam is a leading provider of etching
and cleaning equipment.
The merger would also enable significant cross-selling
opportunities for both Novellus and Lam sales teams, driving
penetration at existing customer accounts. Additionally, the
acquisition will bring in cost synergies, mutually benefiting both
In the last reported quarter, Lam's revenue was $659.0 million
(up 12.8% sequentially) and earnings were above the Street
consensus estimate by 6 cents due to better-than- expected expense
control. The Novellus buyout will eliminate $100 million in costs a
year (starting from the fourth quarter of 2013). The companies have
also stated that the transaction would be accretive to non GAAP
earnings within the first year after the deal closes.
Lam's competitive position is also improving, with the company
now moving to the fourth spot among semi equipment makers, behind
), Tokyo Electron and
Lam Research has a Zacks Rank of #3, which translates into a
Hold rating in the near term (1-3 months).
APPLD MATLS INC (AMAT): Free Stock Analysis
LAM RESEARCH (LRCX): Free Stock Analysis Report
NOVELLUS SYS (NVLS): Free Stock Analysis Report
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