ASML Holding NV (ASML), Europe’s largest semiconductor-equipment supplier, agreed to buy Cymer Inc. (CYMI:US) for 1.95 billion euros ($2.6 billion), its biggest deal ever, to satisfy customer demand for more advanced chipmaking technology.
Cymer investors will get 1.15 ASML ordinary shares and $20 in cash for each stock, the companies said today. That values Cymer at 72 percent more than the stock’s close in New York yesterday. The shares jumped 57 percent to $74.86 at 10:18 a.m. local time. ASML fell as much as 5.6 percent in Amsterdam.
The acquisition will help ASML, whose customers include Samsung Electronics Co. (005930) and Intel Corp. (INTC:US), accelerate research in costly next-generation techniques to make semiconductors more powerful even as they become smaller. Veldhoven, Netherlands- based ASML said today its second-half sales will be at the lower end of forecasts of 2.2 billion euros to 2.4 billion euros.
“As we enter 2013, we recognize our customers’ uncertainty regarding the underlying semiconductor demand for the tablet and smartphone segments, as well as for the PC business,” Chief Executive Officer Eric Meurice said.
The so-called extreme ultraviolet -- or EUV -- lithography technique shrinks the size of chips while increasing their capacity and speed for devices such as handsets and tablet computers. ASML this year sold stakes to Samsung, Intel and Taiwan Semiconductor Manufacturing Co. (TSM:US) to fund the development.
“We think EUV is extremely important for this industry, there is no doubt about it, and customers are asking for it,” Chief Financial Officer Peter Wennink said in a video posted on the company’s website. “We believe that combining ASML and Cymer will speed up the development of the EUV technology.”
ASML traded 4.3 percent lower at 39.55 euros as of 4:25 p.m. in Amsterdam. The stock had gained 27 percent this year through yesterday.
Slowing demand for personal computers forced ASML’s competitor Applied Materials Inc. (AMAT:US) to eliminate as many as 1,300 jobs. The Santa Clara, California-based company in July reduced its projection for industry wide factory-equipment sales by $2 billion for this year to a range of $30 billion to $33 billion.
The PC market will contract by 1.2 percent to 348.7 million units this year, according to IHS iSuppli, the first annual decline since 2001.
“Our clients have no visibility on the PC trend into 2013,” Meurice said on a call.
ASML’s third-quarter sales were unchanged compared with the previous period at 1.23 billion euros and fell 16 percent from the year-earlier quarter. Net income was 275 million euros, compared with 292 million euros in the second quarter, in line with the average estimate from 16 analysts of 277 million euros.
Third-quarter order bookings fell amid sluggish demand for microprocessors for PCs, declining 12 percent to 831 million euros from the second quarter, excluding EUV-systems. That fell short of the average estimate of 922 million euros in a Bloomberg survey.
For the EUV systems, ASML expects deliveries of the first 11 systems in 2013 to be installed at customers for research and development and additional orders for production systems in 2014. ASML has currently received four commitments and expects another four to eight within the next six months, the company said.
“ASML has realized the technology edge of the EUV machine is the light source, and if it doesn’t own it, margins will shift towards suppliers,” said Robin van den Broek, an Amsterdam-based analyst at ABN Amro Bank. “With this deal they’re avoiding a conflict of interest as ASML was already providing engineers to Cymer to solve problems.”
ASML expects it can guarantee volume production of EUV systems, which requires a speed of about 69 wafers per hour, in 2014, which is later than anticipated. Currently, systems that are used for research and development are at a speed of 5 to 7 wafers per hour, spokesman Lucas van Grinsven said by phone.
“This deal shows that concerns about the development of EUV are really big,” said Lee Simpson, an analyst at Jefferies with a hold rating on ASML. “And I think this comes from the customers, who invested in the company.”
The difficulty of the research that is needed to reach the target of 69 wafers per hour for the next generation systems is “monumental,” Simpson added.
ASML intends to manage San Diego-based Cymer’s commercial operations as an independent division in the U.S. and the deal is expected to close in the first half of 2013.
Greenhill & Co. served as financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to ASML. Goldman Sachs Group Inc. advised Cymer and Sullivan & Cromwell LLP was legal counsel.
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