Etch+clean: Lam Research widening scope with SEZ buy

December 11, 2007 – In a move that combines two of the most frequent semiconductor process steps (etch and clean), Lam Research has agreed to acquire Swiss/Austrian firm SEZ Group for $568M in cash ($447M net of cash acquired).

The companies framed the deal as essentially complimentary — SEZ’s wafer cleaning and decontamination (based on its spin-process single-wafer cleaning tools) is a key process adjacent to Lam’s bullseye market of etch, they explained in a statement. SEZ will become a division of Lam offering leading-edge clean technologies, both its own tools and Lam’s single-wafer bevel and wet clean applications. SEZ execs, including chairman and CEO Egon Putzi, will continue with the company under Lam’s ownership. SEZ is projecting about $293M in sales for the current fiscal year.

The per-share pricetag of CHF 38/share was about 40% higher than its latest closing price, and nearly a 54% premium to SEZ’s stock trading average over the past two months. For Lam, the deal represents about 45% of its total cash balance, leaving it with ~$725M, according to analysts. SEZ has about 40% overall market share, and 60% in the single-wafer market, dubbed its fastest growing segment.

The combination of SEZ’s single-wafer installed base with Lam’s emerging clean technologies, process integration capabilities, and global scale, presents “a stronger, established presence in the clean segment of the wafer fab equipment industry,” helping customers solve “the technical challenges of post etch and strip yield issues present in today’s most advanced semiconductor devices,” said Lam president/CEO Steve Newberry, in a statement.

Seeking Alpha cited positive comments from Citigroup’s Tim Arcuri, who thinks that despite the industry’s checkered past with M&A like this, the proposed Lam-SEZ combo “is a good deal longer-term,” noting that Lam has done well in its own price-competitive segment, and the deal should help mitigate R&D spending that has been weighing down margins.

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