KLA, ADE propose $488M tie-up

February 24, 2006 – In the latest episode of an evolving story of consolidation in the metrology sector, KLA-Tencor Corp. has agreed to acquire inspection systems provider ADE Corp. for $488 million in stock.

At the time of the offer, that was about a 7% premium over ADE’s market value. The deal, which has been approved by the boards of both companies, is expected to close in 3Q06. In its SEC filing, ADE noted that should the merger be called off, it may be required to pay KLA-Tencor a $15 million termination fee.

“This combination will allow us to use the significant industry presence of KLA-Tencor to accelerate the growth and development of new products within the semiconductor device area while also providing us with access to its world-wide semiconductor customer base,” stated Chris Koliopoulos, ADE’s president and CEO. “Our current customers in the bare silicon wafer manufacturing industry will also gain access to a broader portfolio of defect inspection and metrology solutions.”

In its most recent quarter (ended in Dec.), KLA-Tencor posted revenues of $488 million and a $76.7 million profit, both flat with the prior quarter. ADE saw revenues slide 3% sequentially in its fiscal 2Q06 (ended in Oct. 2005), with flat profits of $2.9 million. For their most recent 12-month periods, ADE reported about $107 million in revenues and a profit of about $35 million (half of that through a reversal of deferred tax asset valuation allowances). ADE’s fiscal 3Q05 results are due out in a few weeks. In its past four quarters, KLA posted revenues of about $2.0 billion and a net income of $381 million.

The proposed KLA-ADE merger represents the latest turn in an ongoing consolidation in the metrology sector. Earlier this month Nanometrics and Accent Optical Technologies announced their intent to merge in a $90 million deal. And just days ago, Rudolph Technologies and August Technology finally closed their merger, which a year ago generated a tug-of-war involving both Nanometrics and KLA-Tencor.


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