Applied Materials Inc. agreed on Tuesday to merge with Tokyo Electron in an all-stock deal, creating a big new manufacturer of semiconductor and display components with an expected market value of $29 billion.
Behind the merger is the continued rise of smartphones and tablets, creating feverish demand for new processors and displays.
Under the terms of the deal, shareholders of Tokyo Electron will receive 3.25 shares in the newly combined company for each of their existing shares. Investors in Applied Materials will own 1 share of the new company for each share they currently own.
That will leave Applied Materials shareholders with 68 percent of the new company.
The chief executive of Tokyo Electron, Tetsuro Higashi, will serve as chairman, while his counterpart at Applied Materials, Gary Dickerson, will hold the chief executive title. Each company will appoint five members to the new company’s board, and will mutually agree on an 11th director.
The company will begin a $3 billion stock buyback program within a year of the deal’s closing, which is expected by the second half of 2014. Both Applied Materials and Tokyo Electron expect the deal to begin adding to pro forma earnings per share by the end of the first full fiscal year after closing.
The company will take on a new name, as yet undisclosed, and will be incorporated in the Netherlands. It will maintain headquarters in Santa Clara, Calif., and Tokyo and will stay listed on both the Nasdaq stock market and the Tokyo Stock Exchange.
“For five decades, we have each made significant contributions to the semiconductor industry and we have deep respect for the capabilities that the other brings to this combination,†Mr. Dickerson and Mr. Higashi said in a statement. “We share many common values and are confident we will execute together to achieve our strategic and financial goals.â€
Applied Materials received financial advice from Goldman Sachs and legal counsel from Weil, Gotshal & Manges; Mori, Hamada & Matsumoto; and De Brauw Blackstone Westbroek. Tokyo Electron was advised by Mitsubishi UFJ Morgan Stanley Securities and the law firms Jones Day and Nishimura & Asahi.
