Lam Research, KLA-Tenor Call Off Merger on Antitrust Concerns -- Update
October 05 2016 - 8:42PM
Dow Jones News
By Don Clark and Ezequiel Minaya
Lam Research Corp. and KLA-Tencor Corp. called off a planned
$10.6 billion merger announced nearly a year ago, citing opposition
by the Justice Department on antitrust grounds.
The department said late Wednesday it had serious concerns that
the deal would harm competition in the market for machines used to
manufacture computer chips.
Lam, which Gartner Inc. ranks as the second-largest maker of
such machines behind Applied Materials Inc., had agreed to buy
KLA-Tencor, the No. 5 supplier. The companies said they had decided
mutually to call off the deal, a move that calls for no termination
fee to be paid by either party.
The decision by the two Silicon Valley companies comes as little
surprise, following a joint announcement in August that they might
not be able to receive necessary government approvals by Oct. 20,
when they hoped to close the deal.
Lam and KLA-Tencor lead different portions of a market Gartner
put at $33.6 billion in 2015. Lam is the largest maker of machines
that deposit or etch away materials on the silicon wafers used to
make computer chips. KLA-Tencor's machines, by contrast, are used
to measure and inspect circuitry on chips during the manufacturing
process, for purposes that include spotting defects.
Dan Hutcheson, an analyst at VLSI Research, said acquiring
KLA-Tencor could have given Lam access to information about
customers' technology and future directions that would work hurt
competitors, including Applied Materials and Tokyo Electron Corp.
Lam, in theory, would have an edge in knowing what features to add
to its products, he said.
"The proposed transaction presented concerns about the ability
of the merged firm to foreclose competitors' development of leading
edge fabrication tools and process technology on a timely basis,"
said Renata Hesse, acting assistant attorney general of the Justice
Department's antitrust division, in a statement issued late
Wednesday.
KLA-Tencor said Wednesday that the companies decided to
terminate the merger after the Justice Department told the
companies it wouldn't "continue with a consent decree that the
parties had been negotiating." It didn't elaborate. Companies
sometimes negotiate consent decrees with government agencies in
connection with mergers, which in some cases include agreements to
spin off business units.
KLA-Tencor expressed disappointment with calling off the deal,
as did LAM. "We believe that this proposed combination would have
resulted in compelling benefits for our customers, employees and
stockholders, as well as accelerate innovation in the broader
semiconductor industry," said Martin Anstice, Lam's president and
chief executive officer, in prepared remarks.
Mr. Anstice said Lam would explore other collaboration
opportunities with KLA. The companies scheduled separate conference
calls Thursday to discuss their announcement.
Lam slid 0.8% on the news after hours to $95.40, while KLA sank
3.4% to $68.80.
The Lam-KLA deal is the second big deal among makers of chip
production tools to fall victim to U.S. government opposition.
Applied Materials last year dropped its plan to buy Tokyo Electron,
after the Justice Department raised antitrust objections. That
deal, announced in September 2013,(CQ) was expected to create a
company with a market value of $29 billion.
--Brent Kendall contributed to this article.
Write to Don Clark at don.clark@wsj.com and Ezequiel Minaya at
ezequiel.minaya@wsj.com
(END) Dow Jones Newswires
October 05, 2016 20:27 ET (00:27 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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