Novellus, Lam shares surge as analyst sees merger
Reuters, Thursday, April 01, 1999 at 15:16
SAN FRANCISCO, April 1 (Reuters) - Shares of two makers of
semiconductor equipment, Novellus Systems Inc. (NASDAQ:NVLS) and Lam
Research Corp. (NASDAQ:LRCX), surged Thursday after a Merrill Lynch
analyst said the two companies are likely merger partners.
A spokeswoman for Lam Research said that the company does
not comment on rumors or speculation in the market. Novellus
officials did not immediately return calls.
Shares of Lam jumped $4.50 to $33.50 and Novellus rose
$2.50 to $57.625 in active afternoon trading.
Mark Fitzgerald, a Merrill Lynch analyst, said on Thursday
that a few factors are pointing to a possible deal between the
two, one in which Novellus would buy Lam Research.
Novellus, based in San Jose, Calif., recently completed the
sale of 3.5 million common shares, raising about $300 million,
in a financing offering handled by Hambrecht & Quist, he noted.
Another factor that could fuel a merger is that Novellus
was previously restricted from entering some chip equipment
markets as part of a patent litigation settlement with Applied
Materials Inc. (NASDAQ:AMAT), the world's biggest maker of chip
equipment.
"Novellus agreed not to enter into some of Applied's other
markets until April 1," Fitzgerald said. "That restriction is
off, as of today."
Novellus currently makes systems for depositing thin film
over insulated silicon wafers, one of the many steps in the
complex process of making semiconductors. Lam Research, based
in nearby Fremont, Calif., makes etching equipment, which
carves out layers to expose the silicon wafer below and is now
also involved in the chemical mechanical planarization (CMP)
market as a result of an acquisition.
The two companies provide separate steps in the
semiconductor manufacturing process -- which involves about 12
steps, repeated at different phases of the process -- while
Applied Materials provides entire solutions to chip makers.
Lam and Novellus are working together to provide more of a
complete solution approach through Novellus's new systems using
much-vaunted copper technology.
"Lam would put them in the etch business," Fitzgerald said.
"They have tried to do this several times; the bankers had
taken this to the one yard line in January 1997."
Fitzgerald said he believed that Novellus could pay up to
$40 a share for Lam, and that a deal could happen sooner or
later. "I don't have any evidence that this is happening," he
said. "I am just looking at the tea leaves."
Indeed, last week, SG Cowen & Co analyst Min Pang said that
the semiconductor equipment industry was ripe for mergers and
that already this year, a record number of deals had occurred.
Dan Hutcheson, president of VLSI Research Inc., which
tracks the equipment industry, said that the two companies have
talked off and on about a merger for about 10 years and that he
remains skeptical that they will ever pull off a deal.
"I would say that for strategic reasons, it makes sense
today more than it ever has in the past because of (Lam's) CMP
tool, but I tend to discount it since I have dealt with both
companies since their very foundings."
Copyright 1999, Reuters News Service
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