Rumours have circulated for years over the possible merger of Lam Research and Novellus Systems as there is little overlap in product portfolios. However, rumours have finally turned to reality in an all stock deal that values Novellus at US$3.3 billion. The deal is the second major acquisition within the top 10 equipment suppliers this year, following quickly on the acquisition of Varian Semiconductor by Applied Materials.
"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," commented Steve Newberry, vice chairman and chief executive officer of Lam Research. "Novellus's strong capabilities and market leadership in deposition and surface preparation technologies enable Lam to become more deeply entrenched in critical semiconductor manufacturing processes that are important to our customers. We believe the adjacency of our process technologies will provide significant technical benefits that will enable us to achieve greater success together and accelerate our growth."
Richard Hill, chairman and chief executive officer of Novellus, said, "We believe the combination of Lam and Novellus is great news for our customers, investors and employees. The complementary skills, technologies and product offerings of Lam and Novellus will create a strong platform for delivering innovative and cost-effective solutions. For our investors, it presents an ability to participate in the combined company's future value creation potential."
The transaction represents a 28% premium to the closing price of Novellus stock. Novellus shareholders would own around 41% of the combined firm, while Lam shareholders would own 59% of the company.
Lam noted that the transaction would lead to over US$100 million of annualized synergies by end 2013. As with the Lam’s last acquisition of SEZ job losses throughout the corporate structure of Novellus, should not be ruled-out.
With the move to 450mm and the cost of RD&E could be the key catalyst for latest round of industry consolidation as well as the weakening semiconductor capital spending market.
Corporate reshuffling so far announced includes Martin Anstice, who will be assuming position of Lam’s CEO from Steve Newberry at the start of 2012, while Timothy Archer, COO of Novellus will become COO of the combined entity. Ernest Maddock, CFO for Lam will continue in his role.
The fate of Richard Hill, chairman and chief executive officer of Novellus is not known.