AMAT Closes Semitool Acquisition

Applied Materials’ (AMAT - Analyst Report) all-cash acquisition of Semitool Inc. has closed. Around 94% of Semitool shares have been offered for purchase and accepted. Applied Materials intends to buy up any additional shares as may be offered at the same price of $11 per share.

With the FTC and the Justice Department terminating the waiting period under the Hart-Scott Rodino Act last week, the company had only to pay out the agreed $360 million to close the acquisition.

Applied Materials, which so far supplied equipment for chip fabrication, will now acquire an important position in the fast-growing packaging segment as well. The acquisition is expected to bring savings to customers, which should strengthen its position in the mobile devices market (smartphones, notebooks and so forth).

Semitool’s expertise in copper interconnect systems will be a big positive for Applied Materials. The toughest competition in this market has come from Novellus Systems (NVLS - Analyst Report) and Applied Materials itself, so the acquisition will reduce the amount of competition in the market.

Since back-end operations almost always face pricing pressure, Semitool has historically maintained its market position by offering its products at a significantly lower cost. However, the technology has started fetching better prices now and recent results have benefited from customers such as Advanced Micro Devices (AMD - Analyst Report), Micron Technologies (MU - Snapshot Report) and Nanya/Inotera. The acquisition by Applied Materials will also expand Semitool’s customer base, as Applied will be in a position to offer a more complete solution.

Applied Materials’ equipment, service and software products are also used for flat panel displays, solar photovoltaic cells, flexible electronics and energy efficient glass. In addition to semiconductor manufacturing, the acquisition will also further its efforts in the development of solar photovoltaic cells, since Semitool has developed an important tool for the market and has several others in the pipeline.

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