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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (784)	7/5/2005 11:33:42 AM
From: richardred	Read Replies (1) \| Respond to of 7253

August deals face antitrust risk Monday July 4, 6:00 am ET By Cecile Kohrs Lindell in Washington The bidding war for August Technology Corp. may come down not to price but to antitrust concerns. Although the Bloomington, Minn., chip equipment maker on June 28 agreed to a $193 million deal with Rudolph Technologies Inc., industry rival KLA-Tencor Corp., which previously had bid $205 million for August Technology, has vowed to renew its pursuit. Seeking to thwart such a bid, Flanders, N.J.-based Rudolph said last week that a combination of KLA-Tencor and August Technology would pose antitrust risks. But while Rudolph's offer for the company is likely to have an easier time with regulators, neither deal is a slam dunk, antitrust lawyers said. The review by the Department of Justice's Antitrust Division could hinge on how broadly enforcers define the market for semiconductor testing, inspection and metrology equipment, which is used to search for microscopic flaws in chips. The structure of this market and potential customer concerns also are likely to figure in whether the deals receive clearance. In sizing up the market affected by the sale of August Technology, antitrust enforcers will focus on the market for so-called macro defect inspection tools, which are used to spot problems with components used in semiconductor manufacturing, said Robert Doyle, an antitrust partner at Sheppard Mullin Richter & Hampton LLP. KLA-Tencor, the leader in that sector, has about 50% of that market, with August Technology and Rudolph each having roughly 25%. "If the market is defined narrowly, I'd suspect KLA could give up certain assets to make this deal work," Doyle said. One factor that may come into play is the small market for macro defect gear, which is worth roughly $70 million per year. That has led some risk arbitrageurs to speculate that the government would not closely review the deal. But such sentiments are more hopeful than realistic, said another antitrust lawyer. Neither the Justice Department nor the Federal Trade Commission "throws fish back because they are too small," he said, requesting anonymity because he hasn't closely reviewed the specifics of the deal. "Despite recent cases, both agencies look at what customers have to say. They wouldn't necessarily give it a pass if customers didn't complain. They would test the logic of what customers were saying." Some customers have expressed reservations about the impact of KLA-Tencor buying August Technology, which could harm its bid, Doyle said. The Antitrust Division also will examine if smaller technology makers with similar products could enter the market. But several antitrust lawyers said the August Technology merger would reduce the number of competitors in the sector from three to two, which typically arouses antitrust concerns. They said the deal resembles the FTC's 2000 challenge to H.J. Heinz Co.'s acquisition of Beech-Nut Nutrition Corp. Heinz wanted to acquire Beech-Nut so it could more effectively compete against Gerber AG in baby food sales. A federal appeals court concluded the merger was illegal because competition between Heinz and Beech-Nut to gain shelf space, and thus to compete against Gerber, resulted in lower prices. "Currently, smaller parties don't exert restraining power on a larger company's prices," one attorney said. biz.yahoo.com