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tech news- Applied material to buy Varian


Applied Materials Inc. is re-entering the ion implanter business.

Applied and Varian Semiconductor Equipment Associates Inc. have signed a definitive agreement under which Applied will acquire Varian for $63 per share in cash for a total price of approximately $4.9 billion.

The acquisition will extend Applied’s efforts in wafer fabrication equipment (WFE) with the addition of the technology leader in ion implantation. Varian is the leading supplier of ion implantation equipment used by chip makers around the world. Varian also sells an implanter line for solar.

Several years ago, Applied dropped out of the implanter business, it was noted. In 2007, Applied announced its intention to cease future development of ion implanter products and closed its operations in the arena-a move that impacted 270 employees. The company closed its Applied Implant Technologies group based in Horsham, England.

At the time, Applied lagged behind in ion implaters. Now, the deal with Varian will give Applied a ”dominant position in ion implant,” said C.J. Muse, an analyst with Barclays Capital Inc., in a report. Varian has about 75 percent market share in the arena, he said. In 2010, Nissin was projected to have 9 percent share in implanters, followed by Sumitomo (8 percent) and Axcelis (6 percent), according to the firm.

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 price represents a 55 percent premium to Tuesday’s closing price, or a 38 percent premium to Varian’s 30 day average closing price. The closing of the acquisition is subject to customary conditions, including approval by Varian’s shareholders and review by U.S. and international regulators.

“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, in a statement.

Not long ago, Applied’s fab equipment business fell off a cliff; it paid more attention to the solar business. But seeking to regain momentum in the fab equipment market, Applied (Santa Clara, Calif.) has recently thrown down the gauntlet in the arena.

In 2009, Applied acquired the outstanding shares of fab tool vendor Semitool Inc. for $11 per share in an all-cash tender offer. Since 2009, Applied has rolled out a dozen or so products for semiconductor fabs.

”We are incrementally more positive on AMAT as we believe its acquisition of VSEA makes strategic sense. In solar, we believe Applied will be able to accelerate VSEA’s Solion penetration with new solar customers. In semi, we believe the addition of VSEA will expand its servable market into ion implantation, which should continue to outgrow the industry. We believe this deal signals that that the market is undervaluing the semi equipment group, and we expect more strategic M&A deals will occur in the coming year,” said Edwin Mok, an analyst with Needham & Co. LLC, in a recent report. .

”We believe VSEA’s high-efficiency solar cell offering is strategically most important to AMAT. VSEA’s is the emerging leader in the area of high-efficiency solar cell technology. We believe AMAT wants to own this critical technology, as the market is moving away from selective emitters. Furthermore, VSEA’s Solion tool complements AMAT’s Bacinni product. By leveraging its customer base, AMAT should be able to accelerate Solion’s market penetration,” Mok said.

”In semi, ion implant is complementary to other AMAT’s offerings. AMAT will be able to not only integrate ion implant with other tools in the FEOL process flow, but the emerging materials modification implant processes could also be used to address challenges in areas such as etch and CMP. However, AMAT recently announced a plasma doping product that is positioned to compete against VSEA’s PLAD, which currently has a 100 percent market share. We believe this could raise some eyebrows and cause some delays in the regulatory review,” Mok said.

Meanwhile, Varian recently reported its results. Varian’s ”March revenue of $330 million was above guidance and beat consensus of $321 million. EPS of $1.07 slightly beat consensus of $1.06 on strong OM of 28.9 percent, despite higher OPEX,” he said in a recent report.

”F3Q11 (June) revenue guidance of $323-$333 million is essentially flat Q/Q, and well above peers’ outlook of down 5-15 percent Q/Q. Varian confirmed some order push-out, but stated that June Q revenue could have been significantly higher without the push-out. Additionally, Varian stated that it has not seen an increase in competitive pricing action that was highlighted by Axcelis. Clearly, guidance suggests strong adoption of Varian’s new high current implant tool and continued progress in Japan,” Mok said.

”Solar continues to make progress. Varian expects to ship at least 5 more tools in the coming quarter, including a repeat order from a second customer (beyond Suniva). Varian remains confident that revenue will surpass prior targets of $25-30 million in CY11 and $100 million by CY12,” he added





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