Lam Research to acquire Novellus Systems in $3.3 Billion Merger
Lam Research Corp. has announced that it has entered into a
definitive merger agreement to acquire Novellus Systems, Inc. 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;
·
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.
Goldman, Sachs & Co. acted as the exclusive financial
advisor, and Jones Day acted as legal counsel to Lam. BofA Merrill Lynch acted
as the exclusive financial advisor, and Morrison & Foerster LLP acted as
legal counsel to Novellus.