Applied Materials and Tokyo Electron Complete Merge

  • All-stock transaction creating a new company as a merger of equals with combined market capitalization of approximately US$29 billion (¥2.8 trillion)
  • Accelerates development of breakthrough products to address future technology inflections and create greater value for shareholders, customers and employees
  • Tetsuro Higashi to be chairman; Gary Dickerson to be CEO
  • Expected to be accretive to EPS exiting the first full fiscal year following transaction close with a strong commitment to returning cash to shareholders
  • US$$3 billion stock repurchase program targeted for first 12 months following completion of transaction
  • Combined company to maintain dual listing on NASDAQ and Tokyo Stock Exchange and dual headquarters in Santa Clara, California and Tokyo, Japan
  • Live press conference in Tokyo at 7:00 p.m. JST and live conference call and webcast today at 8:00 a.m. EDT/5:00 a.m. PDT

Applied Materials, Inc. and Tokyo Electron Limited announced a definitive agreement to create a global innovator in semiconductor and display manufacturing technology via an all-stock combination which values the new combined company at approximately US$29 billion (¥2.8 trillion). This combination, which has been unanimously approved by the Boards of Directors of both companies, brings together complementary leading technologies and products to create an expanded set of capabilities in precision materials engineering and patterning that are strategically important for customers. The closing of the transaction is subject to customary conditions, including approval by Applied Materials’ and Tokyo Electron’s shareholders and review by regulators. The companies expect the transaction to close in mid to second half of 2014.

The combined organization is intended to accelerate the existing strategic visions of Applied Materials and Tokyo Electron and increase the new company’s opportunity to enable major, future technology inflections and advance customers’ roadmaps in both semiconductor and display. Extraordinary advances in semiconductor and display technology have made it possible to mass produce affordable personal electronics, putting PCs, smartphones, tablets and other amazing devices in the hands of consumers around the world.

Today, the mobility trend is driving a new phase of industry growth and introducing dramatic and fundamental technology changes in the way devices are made. Materials innovation is the most significant lever for customers to drive cost-effective performance gains in mobile chips and displays. With the best and broadest capability in materials engineering, Applied Materials and Tokyo Electron believe this new company will be well-positioned to provide valuable, differentiated device performance and yield solutions that enable the new device architectures and cost-effective scaling that customers need to win.

As a clear signal of the commitment to create a new global enterprise, the company will have a new name, dual headquarters in Tokyo and Santa Clara, a dual listing on the Tokyo Stock Exchange and the NASDAQ, and will be incorporated in The Netherlands.

The new company will have a shared leadership team. Tetsuro Higashi will serve as Chairman, and Gary Dickerson will serve as CEO. The board will be made up of 11 directors with five directors appointed by each company and one additional director to be mutually agreed upon. Seven of the eleven directors will be independent. Bob Halliday of Applied Materials will serve as CFO.

Under the terms of the agreement, Tokyo Electron shareholders will receive 3.25 shares of the new company for every Tokyo Electron share held. Applied Materials shareholders will receive 1 share of the new company for every Applied Materials share held. After the close, Applied Materials shareholders will own approximately 68% of the new company and Tokyo Electron shareholders approximately 32%.

The companies expect to achieve US$250 million in annualized run-rate operating synergies by the end of the first full fiscal year and US$500 million in run-rate operating synergies realized in the third full fiscal year. In addition, the new company expects to realize meaningful savings as a result of the new corporate structure. The new company intends to commence a US$3.0 billion stock repurchase program targeted to be executed within 12 months following the close of the transaction. On a non-GAAP basis, taking into account the buyback, the transaction is expected to be EPS accretive at the end of the first full fiscal year after transaction close.

Goldman, Sachs & Co. acted as Applied Materials’ exclusive financial advisor, and Weil, Gotshal & Manges LLP, Mori, Hamada & Matsumoto, and De Brauw Blackstone Westbroek acted as legal counsel to Applied Materials. Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. acted as Tokyo Electron’s exclusive financial advisor, and Jones Day, and Nishimura & Asahi acted as legal counsel to Tokyo Electron.

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