Applied Materials, Inc. ("Applied") (Nasdaq: AMAT) and Varian Semiconductor Equipment Associates, Inc. ("Varian") (Nasdaq: VSEA) today announced the signing of a definitive merger agreement under which Applied will acquire Varian for $63 per share in cash for a total price of approximately $4.9 billion on a fully-diluted basis.
The price represents a 55 percent premium to yesterday's closing price, or a 38 percent premium to Varian's 30 day average closing price. Varian is the leading supplier of ion implantation equipment used by chip makers around the world. Following the close of the transaction, Varian will operate as a business unit of Applied's Silicon Systems Group and continue to be based in Gloucester, Mass. The transaction is expected to be accretive to Applied's earnings on a non-GAAP basis in the first year.
The acquisition will extend Applied's leadership in wafer fabrication equipment (WFE) with the addition of the technology leader in ion implantation - a critical step in integrated circuit manufacturing. Varian's ion implant products complement Applied's Silicon Systems Group's successful suite of products in the areas of transistor, interconnect, wafer level packaging and patterning. The combined company will provide customers a broad product portfolio for transistor formation, enabling the manufacture of higher performance chips particularly for mobile applications with faster speeds and longer battery life. In addition, Varian's technology has strong potential to extend into adjacent markets, including solar, display and light emitting diodes.
"Varian is a great fit for our strategy to profitably grow share in our core semiconductor business with best-in-class technology and talent," said Mike Splinter, chairman and chief executive officer of Applied. "The pace of product innovation is accelerating, requiring devices that are more mobile, more connected and more personalized. These global trends are driving our customers to find new solutions for smaller transistors and faster and higher performance chips, while pushing the boundaries of innovation. Combined, Applied and Varian will be better positioned to help our customers solve these complex challenges and deliver long-term value to shareholders."
"We believe the opportunity is very attractive for Varian's customers, employees and shareholders," said Varian's chief executive officer Gary Dickerson. "In addition to our combined strengths in the semiconductor space, Applied's proven capability to extend its technology to adjacent markets like solar and display can help unlock the tremendous potential of ion implantation in these markets.
"Trends in chip complexity, transistor scaling and 3-D design are driving growth in the ion implantation market. Applied's broad capability in semiconductor equipment and Varian's ion implant expertise will allow us to work more closely with our customers on integrated process solutions at the transistor level," said Dr. Randhir Thakur, executive vice president and general manager of Applied's Silicon Systems Group. "We are excited to welcome Varian's highly talented team with a history of successful innovation, execution and customer focus.
The merger received unanimous approval by the Boards of Directors of both companies. Under the terms of the merger agreement, Varian shareholders will receive $63 in cash for each share of Varian stock they hold at the time of closing. The closing of the acquisition is subject to customary conditions, including approval by Varian's shareholders and review by U.S. and international regulators.
Applied expects to fund the transaction with a combination of existing cash balances and debt. Applied has secured a commitment for a $2 billion, one-year senior bridge loan facility and plans to arrange for long-term debt financing. Applied also has in place an existing, undrawn $1 billion revolving credit facility. Additional financing arrangements are expected to include replacement of the existing credit facility with a new four-year, $1.5 billion revolving credit facility. Applied remains committed to a strong investment grade capital structure.