Applied Materials, the largest chipmaking equipment supplier, agreed to acquire Tokyo Electron for $9.39 billion in stock in the largest deal for a Japanese company from outside the country in six years.
Gary Dickerson, who just became chief executive officer of Applied Materials on Sept. 1, will be CEO of the combined company, according to a statement from the Santa Clara company and Tokyo Electron Tuesday. Applied Materials shareholders will own 68 percent of the new company, according to the statement.
Dickerson, who replaced Mike Splinter as CEO this month, is moving to consolidate the industry across continents as growth in the chipmaking equipment business slows. The company in August forecast revenue that missed analysts' estimates for the second straight quarter amid a record slump in the personal- computer market and muted semiconductor demand.
"It's a defensive strategy because R&D costs are going up and the number of customers is going down," Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners Inc. in Singapore. "This tells you there's a problem in the industry."
Tokyo Electron shareholders will get 3.25 shares for each share held in the Tokyo-based company, and CEO Tetsuro Higashi becomes chairman of the new entity. Tokyo Electron, the No. 2 maker of chip production machines, reported a 3 billion yen ($30 million) loss for the three months ended June 30.
"It's best for major U.S. companies and Japanese companies to join hands in terms of costs and technology platforms," Higashi told reporters in Tokyo today.
The deal, which the companies described as a "merger of equals," values Tokyo Electron at about 6 percent more than today's closing price. Applied Materials shareholders will get one share in the new company for each they hold.
The combined company forecast cost savings of $250 million in the first year after completion of the deal. The company also plans to buy back $3 billion in stock in the first 12 months after the deal closes.
Applied Materials rose as high as $17.24 in early trading, after closing at $15.99 Monday.