KLA-Tencor and Orbotech announced they have entered into a definitive agreement pursuant to which KLA-Tencor will acquire Orbotech for $38.86 in cash and 0.25 of a share of KLA-Tencor common stock in exchange for each ordinary share of Orbotech, implying a total consideration of approximately $69.02 per share. The transaction values Orbotech at an equity value of approximately $3.4 billion and an enterprise value of $3.2 billion. In addition, KLA-Tencor announced a $2 billion share repurchase authorization. The share repurchase program is targeted to be completed within 12 to 18 months following the close of this transaction.
– Extends KLA-Tencor’s technology and market reach within the electronics value chain
– Expands KLA-Tencor’s addressable market by $2.5 billion in high-growth electronics end markets
– Immediately accretive to revenue growth, non-GAAP earnings and free cash flow per share with approximately $50 million run-rate synergies
– Announces $2 billion share repurchase authorization
With this acquisition, KLA-Tencor will significantly diversify its revenue base and add $2.5 billion of addressable market opportunity in the high-growth printed circuit board (“PCB”), flat panel display (“FPD”), packaging, and semiconductor manufacturing areas. The broader portfolio of leading products, services, and solutions, as well as increased exposure to technology megatrends, will support KLA-Tencor’s long-term revenue and earnings growth targets.
“This acquisition is consistent with our strategy to pursue sustained, profitable growth by expanding into adjacent markets,” commented Rick Wallace, President and Chief Executive Officer of KLA-Tencor. “This combination will open new market opportunities for KLA-Tencor, and expands our portfolio serving the semiconductor industry.” Mr. Wallace continued, “Our companies fit together exceptionally well in terms of people, processes, and technology. In addition, KLA-Tencor has had a strong presence in Israel over the years, and this combination further expands our operations in this important global technology region.“
“This acquisition is a true testament to Orbotech’s strong leadership and success,” said Asher Levy, Chief Executive Officer of Orbotech. “I firmly believe that this deal benefits our employees and creates additional value for our shareholders. Together with KLA-Tencor, we will significantly increase growth potential, accelerate our product development roadmap, and enhance customer offerings.” Mr. Levy added, “Orbotech will continue to operate under the Orbotech brand as a standalone business of KLA-Tencor based in Yavne, Israel.”
Total cost synergies are expected to be approximately $50 million on an annualized basis within 12 to 24 months following the closing of the transaction, and the transaction is expected to be immediately accretive to KLA-Tencor’s revenue growth model, non-GAAP earnings and free cash flow per share.
The transaction has been approved by the Board of Directors of each company and is expected to close before the end of calendar year 2018, subject to approval by Orbotech’sshareholders, required regulatory approvals and the satisfaction of the other customary closing conditions. No approval by KLA-Tencor stockholders is required. The transaction is not subject to any financing conditionality. KLA-Tencor intends to fund the cash portion of the purchase price with cash from the combined company’s balance sheet. In addition, KLA-Tencorintends to raise approximately $1 billion in new long-term debt financing to complete the share repurchase.
J.P. Morgan acted as exclusive financial advisor to KLA-Tencor; Wilson, Sonsini, Goodrich & Rosati acted as KLA-Tencor’s U.S. legal counsel; and Meitar, Liquornik, Geva, Lesham, Tal acted as KLA-Tencor’s Israeli legal counsel.
Barclays acted as exclusive financial advisor to Orbotech; Cravath, Swaine & Moore LLP acted as Orbotech’s U.S. legal counsel; Tulchinsky, Stern, Marciano, Cohen, Levitski & Co.acted as Israeli legal counsel; and Goldman Sachs acted as special advisor to Orbotech’s transaction committee.
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