CORRECT: Advantest Proposes Buying Verigy; Leverages Strong Yen

Advantest Corp. (6857.TO) said Tuesday it has made a proposal worth nearly $730 million to buy out semiconductor-testing company Verigy Ltd. (VRGY), illuminating how Japanese companies have become increasingly willing to leverage the strong yen to expand their businesses overseas.

"We are particularly excited about how Verigy complements our businesses and our strategies for future growth," Advantest said in its proposal to Verigy, an important player in semiconductor testing listed in the U.S. and headquartered in Singapore.

The Japanese chip equipment maker is offering $12.15 per Verigy share, a 33% premium to the stock's $9.14 close Friday on the Nasdaq Stock Market, prior to the buyout news.

The premium Advantest is offering isn't overly high, given the expected benefits of the acquisition, said SMBC Friend Research Center analyst Toru Kitani, noting Verigy's market capitalization of around $777 million.

"This is a good move for Advantest in expanding its product portfolio," he said.

Advantest is the latest example of a Japanese company seeking growth through overseas acquisitions, as the yen hovers stubbornly near a 15-year high against the U.S. dollar.

Advantest shares ended the Tokyo Stock Exchange morning session up 3.9% at Y1,870, while the Nikkei Stock Average fell 0.7%.

Advantest, whose mainstay product is a tester for dynamic random access memory, or DRAM, chips, is trying to diversify. Its memory tester business depends largely on DRAM market conditions, which can be volatile depending on demand for personal computers.

Verigy's strengths are flash memory chip testers and products that test system-on-a-chip devices--those that integrate all functions of a computer or other electronic system into a single integrated circuit. These strengths would be attractive, an Advantest spokeswoman said.

Although Advantest is the world's leading maker of memory chip testers with a market share of more than 60%, according to company figures, it trails Teradyne (TER) of the U.S. in the broader market for electronic device testers.

The Advantest spokeswoman said the acquisition would put the company in a better position to take on Teradyne.

Still, if Advantest ends up raising its offer price, the costs could undermine the benefits.

Last month, Verigy agreed to buy another testing equipment maker, LTX-Credence Corp. (LTXC), also of the U.S., in a $400-million deal.

In Advantest's buyout proposal to Verigy, it said: "We believe a transaction between Verigy and Advantest would provide demonstrably superior value to (Verigy) shareholders, employees and customers compared with the transaction with LTX-Credence."

Verigy said in a statement that Advantest's offer isn't superior to the LTX-Credence deal, but Verigy's board believes the proposal "might lead to a superior transaction, so it has determined to engage in discussions with Advantest."

The Advantest spokeswoman said that whether the company offers more for Verigy shares will depend on discussions to begin soon between the two firms.

Hoping for a high premium, investors rushed to snap up Verigy shares. The stock ended at $12.95 Monday, 42% above its Friday close and higher than Advantest's $12.15 offer price.

-By Juro Osawa, Dow Jones Newswires; 813 6269 2794; juro.osawa@dowjones.com

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