Applied Materials bid $2.2 billion to purchase Kokusai Electrical in a bid in step with the current conservative tone of acquisitions in the capital gear industry. Kokusai’s vertical diffusion furnaces that are primarily utilized by DRAM and NAND distributors would add about 10% to Applied’s revenues.
Kokusai grew about 42% in the memory growth of the previous three years and logged an estimated $1.8 billion in 2018 profits. However, it’s likely to take a significant hit from the current downturn among DRAM and NAND makers who’re its considerable prospects.
Given its relatively modest measurement, the bid is likely to escape becoming one other victim in the China/U.S. trade war, analysts said. It requires administrative approval in China, Israel, Eire Japan, and Korea; however, not in the USA.
“Applied has a long historical past and strong connections in China — I go there often — and we expect the deal will probably be handled fairly there,” mentioned Gary Dickerson, chief representative of Applied. He denied to break out Kokusai’s China profits.
Dickerson helped set off a series of bold; however, an unsuccessful merger attempt within the semiconductor capex industry. Quickly after he joined Applied in 2013, it offered to merge with Tokyo Electron in a deal that would have united the sector’s first- and third-largest players. In early 2015, the U.S. Division of Justice canceled the agreement.
Eighteen months later, regulators struck down a $10.6 billion amalgamation between KLA-Tencor and Lam Research, placing a chill on capex deals regardless of a historical period of incorporation in the growing semiconductor sector overall.
In March 2018, KLA bid $3.4 billion for Israel-stationed Orbotech in a contract that concluded in February with permission from China and others. Analysts stated that the deal gave Applied courage to bid on Kokusai.