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

To: richardred who wrote (2344)	10/20/2010 10:41:15 AM
From: richardred	Respond to of 7254

Three Likely Buyout Candidates in Tech Credit Suisse says Novellus, Teradyne and Verigy could be targeted. Credit Suisse WE EXPECT AN INCREASED level of leveraged-buyout (LBO) activity in the market over the next few quarters and we think semiconductor-capital equipment (SCE) companies screen as attractive candidates for an LBO. If an LBO event occurred in SCE, we believe it could improve valuation multiples for the sector. In particular, our multi-scenario, company-level LBO analysis for all the SCE stocks in our coverage universe suggests that Novellus Systems (NVLS), Teradyne (TER) and Verigy (VRGY) screen as the most likely LBO-takeover candidates from a valuation perspective. These three stocks show 22% to 56% upside in an LBO event under a stressed and baseline capital-expenditures scenario, and yet return 20% internal rate of return (IRR) to potential private equity buyers. Verigy and Applied Materials (AMAT) may also be of interest from a strategy change perspective – in both cases, focusing on profitable product divisions by exiting unprofitable ones, optimizing operating expenses to stream line research and development, and pursue mergers and acquisitions for inorganic growth could be attractive options to increase share-holder value. There is precedence for such restructuring – we note that Novellus and Teradyne management have driven such effective and notable restructuring activities in the last five years. The lithography sector ASML Holding (ASML) and Cymer (CYMI) screen as the least likely candidates for an LBO at current valuations. Recently, there has been an increase in LBO activity in the stock market. We expect this may continue over the next several quarters. Last week, it was reported in the media that Seagate Technology (STX) may be in talks for an LBO by private-equity firms. There has been evidence of an improving high-yield debt market since the credit crisis two years ago. Interest rates are at low levels, and talks of quantitative easing may allow a gradual increase in risk appetite by investors in pursuit of higher yields. While fundraising for private equity remains tough, funds raised in the bubble years of 2005-2007 are nearing the five-year mid-point of their 10-year terms. Private-equity funds plan around a five-year horizon from entry to exit, implying there may be an increase in private-equity-driven LBO activity over the next two years as these funds near mid-life. Private-equity funds will likely not be keen to pay the 10 to 12 times enterprise value/earnings before interest, taxes, depreciation and amortization (EV/Ebitda) multiples of the last peak, but valuations in the semi-cap space have significantly compressed this cycle, and are now trading around five-to-six times EV/Ebitda, below the EV/Ebitda threshold that makes LBO scenarios more plausible. -- Satya Kumar -- Brandon Heiken online.barrons.com

To: richardred who wrote (2344)	11/15/2010 10:46:09 AM
From: richardred	Read Replies (2) \| Respond to of 7254

Buyout Time? Shopping For LBOs In Chip, Equipment Sectors By Eric Savitz Could we see a wave of buyout activity in the semiconductor and chip equipment sectors? As it happens, a pair of analysts independently wrote about that possibility in a pair of research notes this morning. * Citigroup analyst Timothy Arcuri weighed in the equipment sector, asserting that the prospects for buyouts in the sector have improved. “Despite the inherent cyclicality of our sector, most equipment companies have vastly improved their earnings leverage and have seen better cash flows in this cycle – even at comparable revenue levels to prior cycles,” he writes. “Combined with lower valuation, this has driven a recent increase in talk of equipment companies going private,” in particular Lam Research (LRCX). He says a screen for potential LBO targets yields 10 names with potential returns north of 20%. He declares Novellus (NVLS), Verigy (VRGY), Veeco (VECO), Teradyne (TER) and ATMI (ATMI) to be the best targets. * Susquehanna Investment Group analyst Chris Caso, meanwhile, went searching for LBO candidates in the semiconductor sector, and found the picking a little slimmer. Caso asserts that “only a few semi companies make sense as potential LBO candidates given the recent rise in share prices and other constraints.” Caso writes that his analysis suggests an LBO would be possible for Microchip (MCHP), LSI (LSI) and Advanced Micro Devices (AMD), but would be more difficult for Nvidia (NVDA), Marvell (MRVL) and Micron (MU). “We would note that in pursuing this analysis we are not suggesting private equity investors have an active interest in any of the subject companies,” he writes. “Rather, we are presenting this analysis as an alternate valuation method, which should be of interest to public equity investors. In short, if the economics of a private equity deal make sense at current share prices, then this can provide a valuation backstop for stocks.” blogs.barrons.com

To: richardred who wrote (2344)	11/18/2010 8:50:47 AM
From: richardred	Respond to of 7254

UPDATE 1-Verigy to buy LTX-Credence for $422 mln reuters On Thursday November 18, 2010, 4:13 am EST * On closing, Verigy to own 56 pct, LTX 44 pct of combined co * Targets annual cost savings of at least $25 mln Nov 18 (Reuters) - Semiconductor testing company Verigy Ltd (VRGY.O: Quote, Profile, Research, Stock Buzz) plans to acquire smaller rival LTX-Credence Corp (LTXC.O: Quote, Profile, Research, Stock Buzz) in a deal, valued at about $422 million, that will expand its product portfolio and customer relationships. Under the deal terms, Verigy and LTX-Credence would either become wholly owned units of Holdco, a newly created subsidiary, or LTX-Credence would become a wholly owned unit of Verigy, the companies said. LTX-Credence shareholders will receive a fixed exchange ratio of 0.96 Verigy shares or Holdco stock for each LTX-Credence share. Upon closing, Verigy or Holdco will issue about 49 million shares on a fully diluted basis to complete the deal and Verigy and LTX-Credence shareholders will own about 56 percent and 44 percent, respectively, of the combined company. The combined company expects annual cost savings to reach at least $25 million. Spirox, Atmel Corp (ATML.O: Quote, Profile, Research, Stock Buzz) and Texas Instruments Inc (TXN.N: Quote, Profile, Research, Stock Buzz) are some of LTX-Credence's biggest customers. Taiwan Semiconductor Manufacturing Company Limited (2330.TW: Quote, Profile, Research, Stock Buzz) contributed the most to Verigy's revenue in fiscal 2009. Morgan Stanley was Verigy's financial adviser, while J.P. Morgan advised LTX-Credence. Verigy shares closed at $8.91 on Wednesday, while LTX stock closed at $5.98 on Nasdaq. (Reporting by S. John Tilak in Bangalore; Editing by Jon Loades-Carter) finance.yahoo.com

To: richardred who wrote (2344)	12/6/2010 10:33:27 AM
From: richardred	Read Replies (3) \| Respond to of 7254

:+ ) A bullseye Today-A takeover bid.- What a pleasant surprise.- VRGT-Thought I missed, but someone show up. Verigy Spikes On Bid From Advantest Dec. 6 2010 - 9:29 am comments By ERIC SAVITZ Verigy (VRGY), which makes semiconductor test equipment, this morning said it received an unsolicited $12.15-a-share cash acquisition bid from Advantest (ATE). The bid follows an agreement last month for Verigy to merge with LTX-Credence (LTXC) in a stock swap in which Verigy holders would end up with 56% of the combined company. Verigy said its board has reviewed the Advantest proposal and determined that it is “not superior” to the pending LTX-Credence deal, but that the proposal “might lead to a superior transaction,” and will hold talks with Advantest. The board said it is not withdrawing its recommendation that holders support the LTXC deal, but it isn’t making any recommendation on the Advantest offer. But there’s nothing better for investors than the company with multiple suitors: * VRGY this morning is up $3.16, or 34.6%, to $12.30. * Potentially spurned, LTXC is down 84 cents, or 9.9%, to $7.61. blogs.forbes.com