Lam Research buys KLA-Tencor for $10.6 billion

Shares of KLA-Tencor jumped more than 22 percent Wednesday on news that it is being acquired by Lam Research in a deal valued at $10.6 billon.

The two Silicon Valley semiconductor process equipment makers are combining at a time when mergers and acquisitions are reshaping the entire industry. They’re also neighbors – Lam Research is headquartered in Fremont and KLA-Tencor is in Milpitas.

Investors felt good about the deal, sending shares of Lam Research up about 2 percent in trading Wednesday.

KLA-Tencor’s shareholders will receive $5 billion in cash and $5.6 billion in shares of Lam Research, and are expected to own about 32 percent of the combined company. The deal is expected to close in 2016.

Lam Research’s president and CEO Martin Anstice said the combined companies will be better positioned “to meet the market demands of lower power, higher performance, and smaller form factors.”

Rick Wallace president and CEO of KLA-Tencor, said the deal “represents a great outcome for all of KLA-Tencor’s key stakeholders.” He added that shareholders “will receive compelling upfront value, in addition to the opportunity to own a meaningful stake in an industry leader and participate in the upside potential created by the combination.”

The deal is expected to produce about $250 million annual savings over the next two years, increasing to $600 million by 2020.

The past two years have seen a wave of semiconductor mergers. Wednesday, Western Digital announced that it is acquiring Sandisk for $19 billion.

Photo: KLA-Tencor logo (KLA-Tencor)

 

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