David Lammers

M&A Activity Picks Up in Downturn’s Dog Days
August 11, 2008

Mergers and acquisitions activity has picked up in the semiconductor equipment and materials industry in the last few months (see a list below). Two of the biggest remain up in the air – the Applied/Francisco Partners bid to acquire ASMI, and the Sumitomo Heavy Industries attempt to acquire Axcelis Technologies. Another uninvited M&A move also remains unresolved: Cadence Design has its sights set on taking over Mentor Graphics, which the Department of Commerce is reviewing. Asyst also is being pursued.

Many more friendly M&A deals have gone forward. Gartner Inc. analyst Dean Freeman said the pace may have picked up due to the downturn. “It is in the nature of the time you are at,” Freeman said, noting that the valuations of many companies are at relatively low levels. Companies that have cash may find takeover targets more willing to accept an offer now that some companies “are struggling a bit.”

The Applied/Francisco Partners attempt to take over ASMI is particularly interesting. ASMI’s largest shareholders include the founders, who Freeman said “are very proud of what they’ve done.” By gaining business at Intel Corp. for both its low-k and high-k solutions, ASMI made itself attractive enough for Applied to make an offer. At the same time, ASMI has found it difficult to expand beyond its narrow base, putting pressure on the balance sheet. Freeman said if the deals were to go through, Francisco Partners would likely sell ASMI’s successful furnace operation to Kokusai Electric or Tokyo Electron, and do it quickly. 

If the Applied/ASMI battle has its share of transcontinental intrigue and backroom financial maneuvering, the Sumitomo Heavy Industries attempt to buy Axcelis, which is now in a quiet period, is equally interesting. Freeman said a deal “would be very healthy for both of them. It would allow the unified company to offer their best-of-breed tools, instead of having one tool for the Japan market and another for the rest of the world.” And he noted that while Axcelis and Sumitomo have been squabbling over their joint venture, Varian has gained significant market share, particularly in the single-wafer implant market.

Kulicke & Soffa recently announced two deals at the same time. The size of the three companies itself was interesting. In buying Orthodyne (Irvine, Calif.), K&S was able to acquire a smaller, privately held company with 280 employees and a long history of technical innovations. Though Orthodyne does not publish financial statements, K&S CEO Scott Kulicke said Orthodyne had $110M in revenues, with gross margins >50%.

In divesting its wire business to Heraeus, K&S turned to a much larger company that was better suited to dealing with the rising price of gold. Heraeus (Hanau, Germany) has annual sales of 3 billion Euros, precious metal trading revenues of 9 billion Euros, and >11,000 employees. Kulicke said K&S has been negotiating for some time to sell the wire business. “The price of gold has driven up the need for increased working capital. This deal frees up $100M that has been tied up in working capital. While K&S’s revenues will be significantly smaller if the gold metal pass through is excluded, the gross profit will improve by some $40M," he said.

Kulicke emphasized that K&S and Heraeus have negotiated a technology development agreement to learn from the interactions among the wire bonder, the wire, and the capillary. Kulicke said the technology development agreement with Hereaus involves “investments on both sides,” adding that “money will be coming our way to help support that work.”

Entegris is another company which recently acquired a privately held company: Poco Graphite. Entegris CTO John Goodman noted that the semiconductor industry is no longer growing in the traditional mode of 17% CAGRs, leading Entegris to search out for smaller companies which would promote diversification. Poco Graphite is a good example, with revenues in high-temperature corrosion resistant coatings, and materials used in heart valves, among others.

With revenues in medical devices, aero/defense, and “energy in many forms,” Goodman said the Poco Graphite acquisition “helps us build out our toolbox.”

For Poco Graphite, Goodman said being acquired by a public company allows the private equity backers to cash out and keep the venture capital investment cycles flowing.

Carl Zeiss SMT to Acquire Israeli Start-Up Pixer Technology

K&S to Acquire Orthodyne and Divest Wire Business 

KLA-Tencor to Acquire Vistec Inspection Unit  

ASMI to Sell NanoPhotonics Subsidiary to Unnamed Buyer

Entegris to Acquire Poco Graphite for $158M 

Dow to acquire Rohm and Haas in $19B cash deal

Ceradyne to Acquire SemEquip

Agilent Acquires Particle Sizing Systems

Agilent Acquires MTS Systems Nano Business 

Dainippon Screen Acquires Cypress's Silicon Light Machines 

Hedge Fund Challenges Asyst Technologies 

ASMI Awaits Court Decision; Investors Wait For Applied Materials 

Credence and LTX Sign Merger Agreement 

Cadence Proposes to Acquire Mentor Graphics 

ASMI Receives Combined Offer from Applied and Francisco Partners

Axcelis, Sumitomo, and TPG Capital Enter Confidentiality Agreement

Replisaurus Acquires Former SUSS Device Bonder Division

KLA-Tencor Completes First Stage of Acquisition of ICOS Vision Systems 

Nanometrics Acquires Assets of Tevet 

Lam Announces Q1 Earnings; SEZ Becomes Spin Clean Division

Swagelok Company Acquires Hose Products Maker Coreflex LLC 

X-Ray Metrology Vendor Jordan Valley to Acquire Bede  

Posted by David Lammers on August 11, 2008 | Comments (0)