2nd UPDATE: Advantest Proposes Buying Verigy; Leverages Strong Yen
December 07 2010 - 5:18AM
Dow Jones News
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," the Japanese chip
equipment maker said in its proposal to Verigy, an important player
in semiconductor testing listed in the U.S. and headquartered in
Singapore.
Advantest is the latest example of a cash-rich Japanese company
seeking growth through overseas acquisitions, as the yen hovers
stubbornly near a 15-year high against the U.S. dollar.
Also Tuesday, the leading Japanese air conditioner maker Daikin
Industries Ltd. (6367.TO) said it is looking at possible mergers
and acquisitions in the U.S., with Goodman Global Group one of the
targets.
According to Tokyo-based M&A advisory firm Recof Corp., the
value of overseas M&A deals by Japanese firms for the
January-November period jumped 39% on year to Y3.435 trillion. The
number of such deals in the period increased 30% to 337 from 260 a
year earlier--a stark contrast to the shrinking value of M&A
deals targeting Japanese companies, either by foreign or Japanese
firms.
Advantest 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 shares ended the Tokyo Stock Exchange session up 3.7%
at Y1,866, while the Nikkei Stock Average fell 0.3%.
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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