Lam to Acquire SEZ to Help Grow Clean Business

Aaron Hand, Executive Editor, Electronic Media -- Semiconductor International, 12/11/2007 9:49:00 AM

Lam Research Corp. (Fremont, Calif.) has announced that it has signed a binding transaction agreement to acquire the SEZ Group (Villach, Austria). With Lam’s No. 1 position in dry plasma etch and SEZ’s leadership in single-wafer wet cleans, the combined clean business unit that will be created is likely to capture a significant share of the clean market.

The agreement calls for an all-cash transaction in which Lam Research will pay CHF 638 million ($565M) to CHF 641 million ($568M), depending on how employee options are exercised. Net of cash acquired, the purchase price is ~$447M. To effect the acquisition, Lam will offer to acquire all of the outstanding shares of SEZ at a price of CHF 38 (~$34) per share.

In acquiring all outstanding shares of SEZ, Lam will effectively acquire all of SEZ’s assets, including its principal facilities in Villach, Austria. Following the closing, SEZ will become a division of Lam Research, and will offer a full spectrum of clean solutions, including products from its current lineup of single-wafer wet cleans, as well as Lam’s single-wafer bevel and wet clean applications.

Lam’s acquisition of SEZ will combine SEZ’s BEOL and emerging FEOL single-wafer wet cleans with Lam’s bevel plasma and comfined single-wafer wet cleans in the FEOL and BEOL.

The wafer cleaning sector of the industry is a very competitive space, and one increasingly driven by complex technologies. Lam’s strategy in acquiring SEZ is to accelerate its entry into the clean space, according to comments made in a press conference in Zurich, Switzerland, today by Martin Anstice, Lam’s chief financial officer.

Lam’s history and still a big portion of its business today is in dry plasma etch. In the past two years, the company has essentially doubled the size of the company with respect to etch, according to Anstice, going from $1.3B in revenue in 2005 to an estimated $2.6B this year. The company transitioned from the No. 2 player in the marketplace in 2000 to the No. 1 player, and today holds ~49% of the market, Anstice said.

But Lam has a growth strategy that extends beyond etch, and this latest announcement is a significant component of that growth strategy, Anstice said. “Our key strategic focus is defined around executing our business and supporting our customers, and we get to do that in a number of ways,” he said. “One of the most important ways is to support the installed base of our equipment in fabs around the world. And one of the most important reasons for this particular transaction is the opportunity of the combined companies to take an installed base in an etch business and an immersion clean business of our own with a 20-year-old installed base in clean that the SEZ Group provides.”

Lam is targeting to gain 2-3 percentage points of marketshare in the transition from 65 to 45 nm technology, according to Anstice. Of the ~ $30B spent on wafer fabrication equipment by Lam’s customers in 2007, Lam estimates a current opportunity in single-wafer clean of ~$700M, based on the products it has developed in-house. “We’re targeting, as a function of adding new products and capability, to essentially double the potential market in the company in a three-year timeframe,” Anstice said. “Today, our share of the wafer fab marketplace is ~13%. We’re targeting to take that to 17-19%. If the market grows, which it likely will, that means that the available market of the company essentially doubles in absolute dollars over a three-year period.” Lam’s stated objective, Anstice added, is to grow 2-2.5× faster than the industry.

With the help of this acquisition, Lam expects to essentially double its earning potential in the single-wafer clean space over the next three years.

Kurt Lackenbucher, SEZ’s chief operating officer, emphasized that the two companies’ products do not compete or overlap, so there is no plan to eliminate capacity or expertise areas.

“This is not a transaction with a significant cost reduction strategy,” Anstice said in response to a question. “We’re not walking into this trying to find ways to eliminate costs. That’s not the basis for this transaction.” In fact, SEZ will maintain its headquarters in Villach. “This is not about cost reduction. It’s about taking wonderful technologies from two companies, and leveraging that for customers.”

The entire SEZ executive team has committed to remain with the company, including chairman and CEO Egon Putzi. “All our key people are committed to the deal,” Lackenbucher said, noting that this is not a typical scenario. “We found a dialog and a platform with Lam Research. This is frightening, in a way, how close the two companies are in position, in our way of thinking, in the way we approach the technology and customers.”

Lackenbucher added that the acquisition was not the original plan when the two companies began talking about a year ago, but that this was the most preferable option. He also emphasized a couple of times during the conference that SEZ has never been in the “shop window.” “There have been several discussions, but none of them even got close to the dialog we had with Lam Research even a couple months ago prior to this announcement today,” he said.

The transaction is expected to close early in 2008. Full details of the tender offer will be disclosed in the offer document, expected to be published in early January 2008. The offer is expected to close in March 2008. Optimistically, it could close as early as mid-February, but depends largely on the speed of shareholder and regulatory approvals.