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Applied Materials to Acquire Kokusai Electric for $2.2B

Zacks Equity Research

Applied Materials Inc. AMAT recently announced that it has agreed to acquire Japanese semiconductor device maker Kokusai Electric from an investment firm, namely KKR & Co Inc. (KKR).

The deal, which is valued at approximately $2.2 billion, is expected to close within approximately 12 months. This transaction is subject to regulatory approval and the satisfaction of other customary closing conditions.

Following the deal closure, Kokusai Electric will become part of Applied Materials' Semiconductor Products Group and continue to be based in Tokyo.

Deal Rationale

Kokusai Electric is a producer of semiconductor-manufacturing equipment. It focuses on batch processing systems, particularly memory wafers. Kokusai Electric has strong customer relationships, supply chain, and manufacturing capabilities in Japan and Asia. These systems complement Applied Materials' portfolio in single-wafer processing systems.

Service is an important part of the company's portfolio. It delivers key enabling technologies to logic and foundry customers, given well-differentiated products along with growing market share. The latest deal will likely increase Applied Materials' global services business activity by adding Kokusai new processing technologies.

This acquisition is in sync with the company’s strategy of strengthening business by expanding in adjacent markets, particularly Asia. The merger of these two companies will create an equipment powerhouse with a huge range of products, services, solutions, customer breadth and scale.

Coming to financial benefits, the deal will be immediately accretive to Applied Materials' adjusted earnings.

Applied Materials, Inc. Price and Consensus

 

Applied Materials, Inc. Price and Consensus

Applied Materials, Inc. price-consensus-chart | Applied Materials, Inc. Quote

To Conclude

Applied Materials is one of the world’s largest suppliers of equipment for the fabrication of semiconductor, flat panel liquid crystal displays, and solar photovoltaic cells and modules. Given increasing complexity of semiconductors, the demand for its products and services should remain strong at any point in the business cycle.

We believe, Kokusai Electric’s new products, services and solutions compliment Applied Materials' revenue base, and should drive top as well as bottom-line growth.

The company’s President and CEO Gary Dickerson said, "By bringing Kokusai Electric’s talented team into Applied, we believe we will accelerate innovation for customers and create significant value for our shareholders.”

Zacks Rank & Other Stocks to Consider

Currently, Applied Materials has a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Autohome Inc. ATHM, Match Group, Inc. MTCH and Marchex, Inc. MCHX, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Autohome, Match Group and Marchex is currently projected at 20.9%, 15.2% and 15%, respectively.

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