German inquiry stalls KLA, ADE merger

July 11, 2006 – German authorities have begun a Phase II investigation of KLA-Tencor Corp.’s proposed merger with ADE Corp., which will delay the pending closure of the deal first announced in February. The deal already has been approved by antitrust authorities in the US and in all other applicable jurisdictions, according to the companies, which said a July 13 meeting of ADE shareholders to consider the acquisition will be held as scheduled.

Under EU legislation, a transaction proceeds to Phase II review if there are serious doubts as to its compatibility with the common market (i.e., questions its legality under EU competition law). In a Phase II inquiry, if a decision is not rendered within four months, the merger is automatically approved without qualification.

The original deal, announced in February, was valued at about $488 million in stock, calling for ADE shareholders to receive a transaction value of 0.64 shares of KLA-Tencor shares for each ADE share. However, after KLA’s stock price fell more than 20% over the next couple of months, the two firms adjusted the terms of the deal to $32.50/share, reducing the total valuation to about $478 million, but boosting the premium for ADE shareholders to about 25%, vs. only about 7% under the original terms.


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