Applied Gets Deeper Into Client Base With Varian Buyout Nod (AMAT, VSEA, INTC, IBM, MU)

Applied Materials Inc. (NASDAQ: AMAT) has just submitted a SEC filing disclosing that the Chinese Ministry of Commerce has now approved its acquisition of Varian Semiconductor Equipment Associates, Inc. (NASDAQ: VSEA). The merger goes back to May 3 and this was the last of the needed regulatory approvals to close upon the $63.00 per share in cash merger.  

Applied expects to close the merger on November 10, 2011.  The world’s largest equipment maker for semiconductor manufacturing paid a 55% premium back when its own stock was closer to $15.00 versus about $12.35 today.  The company cannot be blamed for the market, but Applied Materials certainly did not heed the “sell in May and go away!” creed.  If it had, perhaps the deal could have been done for 10% or even 20% less depending upon whether or not Varian’s management would have been willing to sell at market-adjusted prices.

Applied has claimed that the acquisition will lift earnings per share within a year as well as adding in $60 million in annual savings after Applied integrates Varian’s ion implantation gear that is used in making chips or integrated circuits for consumer electronics.  Our latest figures show that this may be about 5% of the wafer fabrication equipment market of $35 billion.

This merger was Applied’s largest-ever acquisition and the goal was to gain market share for higher performance chips.  It can also be considered a buy that goes deeper into solar, as well as display and light-emitting diodes.

Varian’s key customers were previously reported as Intel Corporation (NASDAQ: INTC) and IBM (NYSE: IBM), as well as Micron Technology Inc. (NYSE: MU), and key players like GlobalFoundries, Hynix, and others.  Another merger is done, now comes the integration.

JON C. OGG