Shares of KLA-Tencor (NASDAQ:KLAC) were gaining 23.6% to $66.58 with heavy trading volume on Wednesday following the announcement that Lam Research (NASDAQ:LRCX) will acquire KLA-Tencor at price of $10.6 billion, which is 24% more than Tuesday’s closing price. Lam Research will pay $67.2 per share in cash and stock. KLA-Tencor shareholders will receive $32 in cash and half a share of Lam Research common stock for each share of the company they own under the terms of the agreement. After this merger complete, KLA-Tencor own 32% of new company, and have two board members in combined company.
KLA-Tencor report fiscal 2016 first quarter results today. The company has reported revenues of $643 million, net income $105 million and earnings per diluted share $0.66. Compare to forth quarter last year, decrease almost 15% in revenues, 26% in net income and 26% in earnings per diluted share.
Lam Research also announced quarter results today. Comparing to last quarter results, revenues increased 8% to $1,600 million, net income increase 120% to $288.679 million and earnings per share increase 124% to $1.66.
"Lam posted record revenue and earnings in the September quarter and is on track to deliver over 20% revenue growth for the third consecutive year in calendar 2015," said Martin Anstice, Lam Research's president and chief executive officer. "We are positioning the company for continued outperformance by focusing on our commitment to helping our customers solve their most critical challenges, through the delivery of differentiated products and services in the market expanding technology inflections."
This merger will create a premier semiconductor equipment company, leading the industry by serving 42% of Wafer Fabrication Equipment market immediately upon closing. Annual revenue for the combined company is projected to reach approximately $600 million in by 2020, relying on better differentiation of each company's products, therefore creating new capabilities.
Lam Research and KLA-Tencor both believe that combined company will help customers extend Moore’s Law by delivering variability reduction at the atomic level.
Rick Wallace, president and chief executive officer of KLA-Tencor, said "I strongly believe that this transaction represents a great outcome for all of KLA-Tencor's key stakeholders... The combined company will be uniquely positioned to work collaboratively with our customers to help them meet the challenges of FinFET, multi-patterning and 3D NAND development."
This year alone, semiconductor companies were involved in $100.6 billion in mergers and acquisitions, exceeding the $37.7 billion total for all of 2014. Chip makers have long used acquisition to obtain new technology, but recent deals resemble consolidations in the older industry, which were motivated by cutting costs in areas of manufacturing, sales and engineering.