Lam Research and Novellus Systems, two of the world’s largest manufacturers of semiconductor equipments are joining forces now. Lam Research has entered into a definitive merger agreement to acquire Novellus Systems, in an all-stock transaction valued at approximately $3.3 billion. The combined enterprise will retain the name of Lam Research Corp.Total cost synergies are expected to be approximately $100 million on an annualized basis by the fourth quarter of 2013.
Lam has announced a $1.6 billion common stock repurchase program. This new program, which replaces Lam’s existing share repurchase program, 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.
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 percent and 41 per cent, respectively, of the combined company.
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 per cent cash.
Steve Newberry (Vice chairman and CEO, Lam Research): This strategic combination positions Lam Research to lead the development of next-generation semiconductor manufacturing technology and productivity solutions at a time when growing semiconductor demand and increased device complexity are creating significant business opportunities.
Martin Anstice will assume the position of CEO of Lam Research from Steve Newberry effective January 1, 2012, and will continue as CEO following the close of the transaction. 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 U.S. and international regulators. The companies expect the transaction, which has been unanimously approved by both Lam’s and Novellus’s boards of directors, to close in the second calendar quarter of 2012.
Goldman Sachs 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 acted as legal counsel to Novellus.