Lam Research, a Fremont, Calif.-based manufacturer of semiconductor equipment, has acquired fellow Silicon Valley chip equipment vendor Novellus Systems in an all-stock, $3.3 billion deal.
The newly merged enterprise will maintain the Lam Research brand and will continue to produce etch and single-wafer cleaning equipment, while expanding its offering to include Novellus System’s thin-film deposition and surface preparation technologies. According to Lam Research, the combined company will lead the market toward "critical technology transitions," including 3D structures in advanced logic and NAND memory, as well as the scaling to 450 mm wafers.
"This strategic combination positions Lam Research to lead the development of next-generation semiconductor manufacturing technology and productivity solutions at a time when growing semiconductor demand and increased device complexity are creating significant business opportunities," said Steve Newberry, vice chairman and chief executive officer of Lam Research, in a statement. "Novellus's strong capabilities and market leadership in deposition and surface preparation technologies enable Lam to become more deeply entrenched in critical semiconductor manufacturing processes that are important to our customers. We believe the adjacency of our process technologies will provide significant technical benefits that will enable us to achieve greater success together and accelerate our growth."
Newberry will be stepping down from his role as Lam CEO on January 1, but will continue to serve as a vice chairman for the company. Mark Anstice, Lam’s current COO and president, will be the new CEO of the merged companies upon Newberry’s step down next year. Timothy Archer, chief operating officer of Novellus, will continue in the same role within the combined company, while Ernest Maddock, chief financial officer of Lam, will retain his role as well. Lam’s board of directors will add four new directors jointly nominated by Lam and Novellus, the company said.
Lam spokesperson Edward Rebello told CRN that the agreement is intended to grow the two companies, but, as with many mergers, potential job cuts may be considered. "As we see it today, any potential workforce reductions would represent a minority of known cost-savings that we are evaluating," he said.
Multiple analysts this year have lowered their 2011 growth forecasts for the semiconductor market, as falling demand and a disrupted hard drive supply chain have hurt many chipmakers’ sales. This week, chip giant Intel cuts its Q4 revenue forecast in anticipation of lower-than-hoped-for sales -- on the heels of Texas Instruments and Altera making similar announcements. Rebello, however, dismissed the possibility of the industry’s state having spurred the merger.
"We believe that the success of this transaction is less about the cyclical nature of the industry than it is about the complementary fit of Lam's and Novellus' product portfolios, which will better position the combined company to lead the industry in the development of next-generation semiconductor manufacturing technology," Rebello said.
Lam also announced Thursday a $1.6 billion common stock repurchase program which replaces Lam's existing share repurchase program and will be executed over the 12 months following the close of the transaction. Lam and Novellus expect the transaction, which has been approved by both companies’ boards of directors, to close in the second calendar quarter of 2012.