Applied merging with rival firm Tokyo Electron

In a move to better position its business for the rapid shift to mobile computing devices, chipmaking-equipment manufacturer Applied Materials Inc. on Tuesday agreed to a $9.39 billion stock deal to form a new company with rival Tokyo Electron Ltd.

Applied’s stockholders will own 68 percent of the new company, which has yet to be named, and its chief executive officer will be Gary Dickerson, who recently replaced Michael Splinter as Applied’s chief executive.

Under the deal, which values Tokyo Electron at about 6 percent more than its Tuesday closing stock price, Tokyo Electron shareholders will receive 3.25 shares of the new company for every Tokyo Electron share they hold. Applied shareholders will get one share in the new company for each Applied share that they hold.

The agreement is subject to review by regulators and the merger is expected to be completed by the middle or second half of 2014.

Applied Materials has a strong presence in the Flathead Valley after acquiring Semitool in 2009.

The merged business will be headquartered both in Santa Clara, Calif., and Tokyo, listed on both the NASDAQ and Tokyo Stock Exchange, and overseen by a board made up of five members from each company, with another board member to be mutually agreed upon by the two firms.

Its chairman will be Tokyo Electron CEO Tetsuro Higashi. Dickerson reportedly will move to Tokyo.

Applied already is the world’s biggest supplier of chipmaking equipment (Tokyo Electron is No. 3) and its combination with Tokyo Electron is expected to produce a powerhouse with a stock-market value of $29 billion.

The companies noted in a joint news release that their merger would help them better address the shift to mobile gadgets, which are powered by a variety of microchips.

“Today, the mobility trend is driving a new phase of industry growth and introducing dramatic and fundamental technology changes in the way devices are made,” the release said. By combining their technologies, the companies said they’d be better able to address “the new device architectures and cost-effective scaling that customers need to win.”

The semiconductor equipment business has been sluggish due partly to the decline in sales of chips for personal computers, which consumers are shunning in favor of smartphones and tablets. That has hurt Applied’s business.

In its most recent quarterly financial report, the company said its profit tumbled 23 percent to $168 million compared to the same period a year before.

Dickerson said the merged company should do better.

“We believe the combination will accelerate our momentum for profitable growth, increase the value we deliver to shareholders and create great opportunities for our employees,” he said in the news release.

Both companies said they will function as equals in the merger. The new corporation will be incorporated in the Netherlands, a site chosen because both firms considered it neutral territory.

The purchase is the largest of a Japanese company from outside the country since Citigroup’s $8 billion deal for a majority stake in Nikko Cordial in 2007.

Shares of Applied Materials jumped $1.45, or 9 percent, to close at $17.44 on the Nasdaq.

Distributed by MCT Information Services