$1.6 billion deal creates largest lithography equipment making company

ASM Lithography Holding and Silicon Valley Group have announced a definitive merger agreement, whereby ASML will acquire SVG in an all stock transaction valued at approximately $1.6 billion.

The deal, the second-largest merger in the chip equipment industry, will create the world’s largest maker of lithography equipment by cornering just under 50 per cent of the worldwide lithography market.

The lithography equipment sector is said to be growing at a compounded annual growth rate of 30% and is expected to reach US$7.7 billion by 2002.

Under the terms of the merger agreement, SVG will become a wholly owned subsidiary of ASML, and SVG stockholders will receive 1.286 ordinary shares of ASML for each share of SVG common stock they own.

Based on the closing price of ASML and SVG shares as of September 29, 2000, the exchange ratio represents a 58% premium for SVG stockholders who will, following the transaction, own approximately 10% of the combined company.

U.S. based SVG will be merged into ASML with its full product portfolio and manufacturing facilities operating under the ASML corporate umbrella.

Silicon Valley shares rose 28 percent on Monday 2 October, jumping $7.38 to $33.69 in active trading. The American Depository Receipts of ASM Lithography fell $2.44 to $29.88.

One of the big advantages in the deal for ASM Lithography is that it will gain Intel Corporation as a customer. Analysts said support of the deal by the world’s largest chipmaker could help it pass any major regulatory hurdles that it will face.

The merger is likely to face government scrutiny on two levels – on the antitrust front, because the merged company will become the largest player in the lithography area, and possibly on a technological front, because lithography is seen as a crucial U.S. technology.