December 15, 2011 – Marketwire — Lam Research Corp. (NASDAQ:LRCX) will acquire Novellus Systems Inc. (NASDAQ:NVLS), in an all-stock deal worth $3.3 billion. The combined enterprise will retain the name of Lam Research Corp. In addition, Lam Research announced a $1.6 billion stock repurchase program.
The transaction was unanimously approved by Lam’s and Novellus’s boards of directors. It is expected to close in Q2 2012.
The semiconductor manufacturing equipment portfolios of both companies are "complementary," Lam Research noted in its announcement. Lam specializes in wafer etch and single-wafer clean equipment. Novellus provides thin-film deposition and surface preparation technologies. The combined company will target semiconductor manufacturers’ needs in 3D structures and scaling to 450mm wafers.
Lam Research also noted "significant revenue and cost synergies," which are expected to be approximately $100 million on an annualized basis by the fourth quarter of 2013.
Revenue growth is expected to come from shared technical expertise in adjacent technologies; collective development of next-generation tools; and complementary customer relationships, summarized Steve Newberry, vice chairman and CEO, Lam Research.
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% and 41%, respectively, of the combined company.
Lam’s $1.6 billion common stock repurchase program replaces its existing share repurchase program. It 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’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% cash.
Martin Anstice, who is succeeding Steve Newberry as Lam CEO on 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.
The closing of the transaction is subject to customary conditions, including approval by Lam’s and Novellus’s stockholders and review by US and international regulators.
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.
Conference Call and Webcast Information
The companies will hold a joint conference call and webcast today at 6:15PM EST (3:15PM PST) to discuss this announcement. The conference call can be monitored by dialing 1-888-549-7750, passcode 4498125, within the U.S. and 1-480-629-9770, passcode 4498125, for all other locations. The webcast can be accessed via http://investor.lamresearch.com and http://ir.novellus.com.
Lam Research Corp. is a major supplier of wafer fabrication equipment and services to the world’s semiconductor industry. For more information, visit http://www.lamresearch.com.
Novellus Systems, Inc. (NASDAQ: NVLS) provides advanced process equipment for the global semiconductor industry. For more information, please visit www.novellus.com.