Axcelis pummeled after SHI axes takeover talks

September 15, 2008 – The public battle between Axcelis Technologies’ and would-be suitor and Japanese JV partner Sumitomo Heavy Industries (SHI) seems to have run aground for good — and for once, the communication breakdown happened behind closed doors.

Earlier this year, in a surprisingly public spat, Axcelis rejected a proposed ~$540M takeover deal by SHI, with whom it runs a JV in Japan, Sumitomo Eaton Nova (SEN). Sumitomo later sweetened the deal and added a private-equity partner, but was again rebuffed.

According to a letter filed with the SEC, SHI told Axcelis executives that it would not make a definitive proposal and that talks were now “on hold.” Mary Puma, chairman/CEO of Axcelis, wrote that after further due diligence between the two firms, no revised offer was presented as had been expected. “Given SHI’s repeated failure to deliver a new proposal for the purchase of Axcelis, and with the increasing uncertainty as to whether SHI would ever make such a proposal, the Axcelis Board determined that the additional process requested by SHI in August was not in Axcelis’ shareholders’ best interests,” she wrote, and a last-chance final deadline of end-of-August to “become one company” with an exchange of SEN to Axcelis shares came and went.

In the end, Puma wrote, “none of SHI’s stated concerns, including the difficulty of SHI implementing a restructuring of Axcelis, market acceptance to date of the Optima products, and Axcelis’ current financial performance, would have been resolved through further near term due diligence.”

With a deal seemingly dead, Puma also took shots at the way the proposed takeover was handled back-and-forth on newswires in full view of the public. And she also noted that SHI could have made a loan to Axcelis, whose share of their SEN JV’s cash “has been trapped in Japan” due to a dispute over dividends. SHI’s final proposal, she writes, “offered a small loan from SEN” but was contingent upon SHI taking control of the JV — essentially “establish[ing] SEN as a sanctioned competitor of Axcelis.”

To say investors are voicing their displeasure at the news of SHI’s abandonment is an understatement — they’ve eliminated two-thirds of ACLS’ market value in a day, sending its stock price to its lowest point since going public eight years ago. For perspective: in broader markets, the only companies who managed a worse day were Lehman Brothers (-95%-99%), which stunned world markets with its sudden bankruptcy over the weekend when its own last-gasp takeover efforts fell through, and new federal welfare case Freddie Mac (-69%).


Easily post a comment below using your Linkedin, Twitter, Google or Facebook account. Comments won't automatically be posted to your social media accounts unless you select to share.