Buy gives ASML top spot in chip niche
By Bloomberg News
October 2, 2000, 7:05 a.m. PT
AMSTERDAM, Netherlands--ASM Lithography agreed to buy U.S. rival Silicon Valley Group for $1.59 billion (1.8 billion euros) in stock, becoming the biggest maker of machines that print circuit images onto computer chips.
Netherlands-based ASML will pay 1.286 shares for each share of Silicon Valley Group, the companies said. That values the San Jose, Calif., company at $42.73 a share, or about 60 percent more than Friday's closing price.
The market for lithography equipment is expected to rise about 30 percent a year to $8 billion by 2002, as demand from chipmakers swells, according to Dataquest. The purchase will give ASML the world's biggest chipmaker, Intel, as a customer, analysts said.
"It's a good deal for ASML and will give it Intel--the last bastion to world dominance in their field," said John McPate, an analyst at Salomon Smith Barney in London who rates the shares "outperform."
Shares of ASML fell as much as $2.21, or about 6 percent, to $31.03. Silicon Valley Group shares in Germany rose as much as $6.19, or about 25 percent, to $31.03.
The purchase will immediately add to earnings, ASML said. It requires regulatory approval and is expected to be completed in the first half of next year.
The acquisition will let ASML overtake Nikon as the top maker of lithography machines. The machines, called steppers and scanners, project an image of circuits onto a silicon wafer--one of the most critical and most expensive parts of making a chip. As chipmakers increase production to meet demand for computers and mobile phones, they will need such machines.
Demand
Chipmakers such as Philips Electronics and Taiwan Semiconductor Manufacturing are expected to spend $60 billion this year to meet demand for chips used in phones and other products. They aim to make smaller circuits, leading to faster chips that consume less power.
"We haven't done this deal because of cost savings--the objective is to accelerate the process" of making new products, said ASML chief executive Douglas Dunn on a conference call. "We have very fierce competitors in Canon and Nikon, and we're only as good as our last product."
Rivals to ASML such as Nikon and Canon have recently announced plans to boost production. Nikon last month said it will increase its capacity to make machines used in the production of semiconductors by 22 percent next year.
Shares of ASML have risen about 2 percent this year, while Silicon Valley Group shares have risen 49 percent. The Standard & Poor's SmallCap Equipment (Semiconductor) Index has fallen 3.3 percent.
ASML was advised by Merrill Lynch. Silicon Valley Group was advised by Credit Suisse First Boston. |
