ASML chief - "There isn't a week that goes by when a customer doesn't call me asking for more orders, he told a conference call" -
So, where is the slowdown?
Monday October 2, 6:21 am Eastern Time
ASML takes world number one spot with SVG buy
(UPDATE: Adds conference call, Nikon reaction)
By Philip Blenkinsop
AMSTERDAM, Oct 2 (Reuters) - Dutch ASM Lithography NV said on Monday it would buy rival chip equipment maker Silicon Valley Group Inc (NasdaqNM:SVGI - news) in a stock deal worth 1.8 billion euros ($1.6 billion) to create the world's largest maker of lithography equipment.
Under the terms of the agreement, SVG shareholders will get 1.286 ordinary ASML shares for each SVG share. Based on the closing prices on Friday, ASML said this represented a 58 percent premium to SVG shareholders.
ASML shares fell sharply at the opening as investors showed concern over the cost of the acquisition. The shares, which reached a high of 52.00 euros on March 6, were down 4.4 percent at 35.94 euros at 1000 GMT in a slightly firmer market.
The fall implied a deal price nearer 1.72 billion euros.
ASML is the world's second largest maker of scanners and steppers, machines which map out the circuitry for computer chips, although it has been quickly catching up market leader Nikon and nearing it this year.
By buying up the fourth largest maker it will capture the number one spot. The combined market share for 1999 was 43 percent.
A Nikon spokesman said increased capital expenditure by Japanese chipmakers this year would increase its sales after last year's dip and help shore up its position.
According to Dataquest, the lithography equipment sector is growing at a compound annual growth rate of 30 percent and is expected to reach 8.7 billion euros ($7.7 billion) by 2002. While some observers are nervous about a dip, ASML Chief Executive Doug Dunn affirmed the sector's strength.
``There isn't a week that goes by when a customer doesn't call me asking for more orders,'' he told a conference call.
Pro forma sales and net income for the 12-month period to June 30, 2000, were 2.55 billion euros and 255 million euros respectively.
SVG holders will own about 10 percent of the combined company.
NEXT GENERATION TECHNOLOGY
ASML's Dunn said the boost to market share was secondary to the main rationale for the deal -- to combine the technological strengths of the two as the industry pushes for continually more advanced tools.
The lithography industry is undergoing a steady shift to finer resolution as well as to larger 300 millimetre silicon wafers.
The deal combines the high volume production capacities of ASML with the SVG's strengths in optical technology and early introduction of machines.
Dunn told the conference call the two companies would continue producing their current 193 nanometre wavelength models, but would combine forces as the technology sharpened to 157 nanometres and beyond.
ASML ADDS INTEL
The deal will also add SVG's photoresist track and thermal product lines to ASML's offerings, but perhaps most significantly it should add one key customer, Intel (NasdaqNM:INTC - news).
``The most important part is that SVG is one of the suppliers of Intel. This should make it easier for ASML to get in...Intel has two key suppliers -- SVG and Nikon. ASML has tried to get in but it hasn't been easy as Intel tend to copy their factories,'' said Eric de Graaf, analyst at ING Barings, referring to the world's number one chip maker Intel.
Of SVG's sales 68 percent come from the United States and much of that from Intel. Dunn said Intel were ``in general terms supportive'' of the move.
The Nikon spokesman acknowledged the merger would make competition tougher.
Other analysts also welcomed the deal and said the price, although high, could be justified.
``ASML is buying a company with excellent tools for the next generation... SVG is strong in the optical part of the machines. ASML is strong in the mechanical part and the alignment. It makes the quickest machines in the industry,'' said Frits de Vries, analyst at Rabo Securities.
De Vries called the deal a strategic step forward, as well as a defensive move as SVG was beginning to sell next generation machines to some of ASML's long-term customers.
The deal, which has been approved by the boards of directors of both companies, would immediately add to ASML's earnings and is expected to close in the first half of 2001, ASML said in a statement.
Silicon Valley Group shares closed at $26-5/16 on Friday, up 15 percent, or $3-7/16. They reached as high as $33-3/4 in early March and a low of $20 last week. |
