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Entegris (ENTG) Completes Buyout of CMC Materials for $5.7B
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Entegris (ENTG - Free Report) recently announced that it has completed the acquisition of CMC Materials.
The total purchase price for the acquisition amounted to $5.7 billion, including $3.8 billion paid in cash to CMC shareholders, 12.9 million Entegris shares and approximately $900 million of debt retired and $200 million of acquired cash.
Entegris used debt to finance the cash portion of the purchase, which consisted of term loan of $2.50 million, senior secured notes of $1.6 million due in 2029, senior unsecured notes of $895 million due in 2030 and a short term 364-day unsecured bridge loan of $275 million due in 2023.
Entegris reported its cash & cash equivalent to be $352.7 million in first quarter 2022, which provides required liquidity to the company to meet its short-term debt related to the acquisition.
CMC Materials is one of the leading suppliers of advanced materials for the semiconductor industry, which is complementary with Entegris’ products and broadens the latter’s product portfolio, thus allowing it to cater to a larger market.
With the completion of the transaction, Entegris has now changed its operating model and currently operates in four divisions – Microcontamination Control, Specialty Chemicals and Engineered Materials, Advanced Materials Handling, and Advanced Planarization Solutions.
Entegris’ Acquisition of CMC to Aid Price Movement
Entegris manufactures electronic materials for the semiconductor market. The company is facing increasing demand for its capex-driven solutions like fluid handling, FOUPS, gas filtration and purification products, which grew more than 50% in the last-reported quarter.
However, Entegris shares have failed to accelerate due to the unfavorable current macro-economic scenario and the prevalent geopolitical tensions created by the COVID-19 pandemic and the Russia-Ukraine war.
The current geopolitical turmoil has created economic threats like supply chain constraints, rising inflation and likely chances of a recession, which have impacted the semiconductor industry.. This is reflected by the share price movement of Entegris, along with that of its peer, Axcelis Technologies (ACLS - Free Report) , and notable semiconductor manufacturing companies like onsemi (ON - Free Report) and Microchip Technology (MCHP - Free Report) .
Entegris’ shares have lost 33.4% in the year-to-date (“YTD”) period compared with the Zacks Electronics - Manufacturing Machinery industry fall of 38%.
Entegris’ peer in the Electronics Manufacturing Machinery industry, Axcelis’ shares have lost 33.5% YTD, reflecting the negative sentiments in the industry.
Microchip’s shares in the YTD period have lost 35.5% in the Zacks Semiconductor - Analog and Mixed industry.
However, with the completion of the CMC Materials acquisition, Entegris has potentially expanded its content wafer opportunity and unit-driven revenues from 70% to approximately 80%, and has also further deleveraged its balance sheet.
The acquisition is expected to be accretive to Entegris’s non-GAAP earnings in a year. Entegris also expects to realize $75 million in run-rate cost synergies and $40 million in capital expenditure synergies within 12 to 18 months.
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Entegris (ENTG) Completes Buyout of CMC Materials for $5.7B
Entegris (ENTG - Free Report) recently announced that it has completed the acquisition of CMC Materials.
The total purchase price for the acquisition amounted to $5.7 billion, including $3.8 billion paid in cash to CMC shareholders, 12.9 million Entegris shares and approximately $900 million of debt retired and $200 million of acquired cash.
Entegris used debt to finance the cash portion of the purchase, which consisted of term loan of $2.50 million, senior secured notes of $1.6 million due in 2029, senior unsecured notes of $895 million due in 2030 and a short term 364-day unsecured bridge loan of $275 million due in 2023.
Entegris reported its cash & cash equivalent to be $352.7 million in first quarter 2022, which provides required liquidity to the company to meet its short-term debt related to the acquisition.
CMC Materials is one of the leading suppliers of advanced materials for the semiconductor industry, which is complementary with Entegris’ products and broadens the latter’s product portfolio, thus allowing it to cater to a larger market.
With the completion of the transaction, Entegris has now changed its operating model and currently operates in four divisions – Microcontamination Control, Specialty Chemicals and Engineered Materials, Advanced Materials Handling, and Advanced Planarization Solutions.
Entegris, Inc. Price and Consensus
Entegris, Inc. price-consensus-chart | Entegris, Inc. Quote
Entegris’ Acquisition of CMC to Aid Price Movement
Entegris manufactures electronic materials for the semiconductor market. The company is facing increasing demand for its capex-driven solutions like fluid handling, FOUPS, gas filtration and purification products, which grew more than 50% in the last-reported quarter.
However, Entegris shares have failed to accelerate due to the unfavorable current macro-economic scenario and the prevalent geopolitical tensions created by the COVID-19 pandemic and the Russia-Ukraine war.
The current geopolitical turmoil has created economic threats like supply chain constraints, rising inflation and likely chances of a recession, which have impacted the semiconductor industry.. This is reflected by the share price movement of Entegris, along with that of its peer, Axcelis Technologies (ACLS - Free Report) , and notable semiconductor manufacturing companies like onsemi (ON - Free Report) and Microchip Technology (MCHP - Free Report) .
Entegris’ shares have lost 33.4% in the year-to-date (“YTD”) period compared with the Zacks Electronics - Manufacturing Machinery industry fall of 38%.
Entegris’ peer in the Electronics Manufacturing Machinery industry, Axcelis’ shares have lost 33.5% YTD, reflecting the negative sentiments in the industry.
onsemi’s shares have lost 29.9% YTD compared with the Zacks Semiconductor - Analog and Mixed industry’s fall of 29.7%.
Microchip’s shares in the YTD period have lost 35.5% in the Zacks Semiconductor - Analog and Mixed industry.
However, with the completion of the CMC Materials acquisition, Entegris has potentially expanded its content wafer opportunity and unit-driven revenues from 70% to approximately 80%, and has also further deleveraged its balance sheet.
The acquisition is expected to be accretive to Entegris’s non-GAAP earnings in a year. Entegris also expects to realize $75 million in run-rate cost synergies and $40 million in capital expenditure synergies within 12 to 18 months.
Entegris currently carries a Zacks Rank# 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.