May 5, 2006 – Investment firm Mellon HBV Alternative Strategies, a 6% owner of ASM International NV, said it intends to attend the company’s shareholders meeting on May 18 with its own agenda — to come up with an endgame strategy for the company’s frontend business, seen as not synergistic with its other areas of business.
Mellon noted that ASMI has spent 350 million euros on R&D since 2000, but implied market capitalization of its frontend business has decreased from 300 million euros to less than zero today, a comparison that the firm views as “an alarming development,” since it suggests investments in the frontend unit have exceeded the overall company’s net worth.
“Although ASMI’s front-end business has demonstrated a good technological expertise in a selected number of market segments, Mellon HBV believes it has failed overall to generate satisfactory margins over the last five years,” said the company, in a statement. “Combined with a large and broadly allocated R&D budget, this has led to significant value erosion, which is contrary to industry trends.”
Mellon listed several changes it will push for adoption at the shareholders’ meeting, including a reduced stake in ASM PT, R&D cutbacks, and possibly an outright sale the frontend business, unless a clear synergy with the backend business is demonstrated. Mellon also says it will vote against the board appointment of Chuck Del Prado, son of CEO Arthur Del Prado, as well as proposed board members Berend Brix and Van Amerongen. In addition, the firm wants a clear roadmap to profitability in line with industry peers, as well as restrictions on authorizations to issue shares, seen as detrimental to outside shareholders who represent the majority of issues share capital.
ASMI stated in December that it would allow debate on the merits its frontend-backend business strategy at its general meeting, stating that “from time to time, a number of ASMI shareholders have questioned the reasons of combining what are perceived to be distinct operations.”
The company has already taken steps to get its core frontend business areas back on track to profitability. In February of this year, the company said it would scale back its NuTool copper plating, planarization, and electrochemical mechanical deposition processes business to “a small operation” to focus on process and IP licensing to focus on licensing the technology. The early-stage technology business was purchased in March 2004 for roughly $43 million, in hopes it would accelerate development and commercialization of advanced back-end-of-line copper/low-k interconnect technologies.
ASMI also is consolidating the wafer-handling platforms used in its transistor capacitor product group, including atomic layer deposition (ALD) and plasma-enhanced atomic layer deposition (PEALD) acquired from South Korea’s Genitech in April 2004. The restructuring costs were projected to exceed 50 million euros, roughly four times the company’s 12 million euros in revenues over the past three quarters.