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Market Update

Applied Materials and Tokyo Electron in $7 Billion Deal

Author: Devan Biswas
Last Update: 10:29 AM ET September 25 2013

10:25 AM New York Applied Materials agreed to acquire Tokyo Electron Limited for $7 billion in a largest cross-border deal for a Japanese company in six years. The fast consolidating chip making industry is suffering from falling demand and rising R&D costs.

Applied Materials Inc agreed to acquire Tokyo Electron Ltd for $9.39 billion in stock payment.

The deal is the largest purchase of a Japanese company by any foreign company in six years as the global economy recovers but chip makers remain mired in excess capacity.

The demand for electronic chips are now increasingly consolidated in four largest players including Samsung Electronics and Intel and telecom and other mobile devices drive the new growth in the industry.

The deal between the two chip makers is worth $7 billion after eliminating $2.5 billion cash held.

Tokyo Electron shareholders will receive 3.25 shares in the merged entity for each share held and the offer valued the Japan based chip maker for 16.5 times operating earnings.

The recently appointed Chief Executive of Applied Materials, Gary Dickerson will lead the merged company and the merger is expected to be complete by the middle of next year.

Tokyo Electron increased soared 13% in Tokyo trading to 5,490 yen and Applied Materials advanced 9% in the pre-market trading.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc