Applied Materials, Tokyo Electron terminate $9.39 bn merger over regulatory issues

Applied Materials Inc, the world's largest producer of chip-making equipment, today scrapped its $9.39 billion takeover bid for smaller Japanese rival Tokyo Electron Ltd, after the US regulator opposed the deal.

The decision came after the US Department of Justice (DoJ) told both companies that their remedy proposal would not be sufficient to replace the competition lost from the merger.

Applied Materials said no termination fee would be payable by either company.

The aborted deal comes just three days after Comcast Corp decided to drop its $45.2 billion takeover bid for Time Warner Cable after the DoJ and the US Federal Communications Commission opposed the deal.

Applied Materials had, in September 2013, struck a deal to acquire Tokyo Electron in an all-stock deal valued at $9.39 billion, which if successful, would have been one of the biggest-ever Japanese acquisitions by a foreign company. (See: Applied Materials to buy Tokyo Electron in $9.39-bn stock deal)

As soon as the deal was announced, analysts said that the transaction would invite regulatory scrutiny since it would combine two of the three largest players in the industry.

"We viewed the merger as an opportunity to accelerate our strategy and worked hard to make it happen," said, Gary Dickerson, president and CEO of Applied Materials. "While we are disappointed that we are not able to pursue this path, our existing growth strategy is compelling. We have been relentlessly driving this strategy forward and we have made significant progress towards our goals.

Without giving details of the DoJ's objections, Tokyo Electron said in a separate statement, ''There remains a gap between the view of Tokyo Electron and Applied Materials and the view of the United States Department of Justice, and it has become apparent that such gap will not be able to be bridged.''

Apart from the DoJ, the deal was under review by the Ministry of Commerce in the People's Republic of China, the German Federal Cartel Office, South Korea's competition regulators and the Japanese Federal Trade Commission.

Applied Materials was the top global semiconductor equipment supplier in 2014 with 16.2 per cent market share while Tokyo Electron held 9.1 per cent, taking the combined market share to over 25.3 per cent.