KLA-Tencor (NASDAQ: KLAC), a supplier of process control and yield management solutions for the semiconductor industry, and Lam Research (NASDAQ: LAM), a supplier of wafer fabrication equipment and services to the semiconductor industry, announced nearly a full year ago they would merge.
The two companies said on October 21 that as a combined entity it will hold “unmatched capability in process and process control” and be in a better position to help the semiconductor industry “extend Moore’s Law and performance scaling generally.” Combined, the two companies would account for close to $9 billion in annual revenue.
The transaction was also expected to be accretive to Lam Research’s earnings and free cash flow and realize $250 million in savings within 24 months and create $600 million in incremental annual revenue in 2020 and beyond.
The original deal valued KLA-Tencor at approximately $67.02 per share.
However, KLA-Tencor said on Thursday that it reached a mutual understanding with Lam Research and will terminate the proposed merger. The companies noted that the U.S. Department of Justice advised them that it would not continue with a consent decree that the parties had been negotiating.
Accordingly, the companies felt it is in the best interest of stakeholders to call off the combination for good. There will be no termination fees payable by either company.
Even though a business combination is not possible at this time, KLA-Tencor said that it will continue collaborating with Lam Research very closely.
Here is what the company’s President and CEO Rick Wallace had to say:
“Today our customer engagement and market leadership is strong and KLA-Tencor is delivering superior financial results. Growth and earnings momentum is expected to continue as we go forward, fueled by new products in the marketplace today, and with many more products in the pipeline,” continued Mr. Wallace. “Additionally, our collaboration over the past year with Lam Research and with our customers has affirmed the value of closer cooperation between process and process control for new, enabling solutions. For that reason, we plan to explore collaboration opportunities with Lam Research around programs identified as beneficial to our customers.”
In a separate press release, KLA-Tencor said that its Board of Directors approved an increase in the company’s quarterly dividend payment to $0.54 from $052.
Wallace said that the dividend boost reflects “the continued strength and sustainability” of its cash flow and its “confidence in its business model.
Lam Research’s stock hit a new 52-week high of $100.47 on Thursday before closing the day at $100.19, up more than 4 percent. Shares of KLA-Tencor’s stock ended the day higher by just 0.81 percent at $71.79.