KLA-Tencor’s $3.4 Billion Acquisition of Orbotech

J.P. Morgan acted as exclusive financial advisor to KLA-Tencor; Wilson, Sonsini, Goodrich & Rosati acted as KLA-Tencor’s U.S. legal counsel; and Meitar, Liquornik, Geva, Lesham, Tal acted as KLA-Tencor’s Israeli legal counsel. Barclays acted as exclusive financial advisor to Orbotech; Cravath, Swaine & Moore LLP acted as Orbotech’s U.S. legal counsel; Tulchinsky, Stern, Marciano, Cohen, Levitski & Co. acted as Israeli legal counsel; and Goldman Sachs acted as special advisor to Orbotech’s transaction committee.

KLA-Tencor Corporation (NASDAQ: KLAC) (“KLA-Tencor”) and Orbotech Ltd. (NASDAQ: ORBK) have entered into a definitive agreement pursuant to which KLA-Tencor will acquire Orbotech for $38.86 in cash and 0.25 of a share of KLA-Tencor common stock in exchange for each ordinary share of Orbotech, implying a total consideration of approximately $69.02 per share. The transaction values Orbotech at an equity value of approximately $3.4 billion and an enterprise value of $3.2 billion. In addition, KLA-Tencor announced a $2 billion share repurchase authorization. The share repurchase program is targeted to be completed within 12 to 18 months following the close of this transaction.

With this acquisition, KLA-Tencor will significantly diversify its revenue base and add $2.5 billion of addressable market opportunity in the high-growth printed circuit board (“PCB”), flat panel display (“FPD”), packaging, and semiconductor manufacturing areas. The broader portfolio of leading products, services, and solutions, as well as increased exposure to technology megatrends, will support KLA-Tencor’s long-term revenue and earnings growth targets.

Total cost synergies are expected to be approximately $50 million on an annualized basis within 12 to 24 months following the closing of the transaction, and the transaction is expected to be immediately accretive to KLA-Tencor’s revenue growth model, non-GAAP earnings and free cash flow per share.

The transaction has been approved by the Board of Directors of each company and is expected to close before the end of calendar year 2018, subject to approval by Orbotech’s shareholders, required regulatory approvals and the satisfaction of the other customary closing conditions. No approval by KLA-Tencor stockholders is required. The transaction is not subject to any financing conditionality. KLA-Tencor intends to fund the cash portion of the purchase price with cash from the combined company’s balance sheet. In addition, KLA-Tencor intends to raise approximately $1 billion in new long-term debt financing to complete the share repurchase.

KLA-Tencor Corporation manufactures yield management and process monitoring systems for the semiconductor industry. The company, led by Richard P Wallace, Bobby R Bell and Bren D Higgins, in 2018 recorded $3.48 Billion Revenues.

Orbotech, Ltd. designs, develops, manufactures, markets, and services automated optical inspection systems and imaging solutions. The company, led by Asher Levy, Amichai Steimberg and Edu Meytal, in 2017 recorded $900 Million Revenues.

WSGR advised KLA-Tencor with a team including Bradley Finkelstein (Picture), Douglas Schnell, John Olson, Emma Sarkisyan, Brian Chan (M&A), John McGaraghan, Barath Chari (IP&IT), Scott McCall, Brandon Gantus, Briza Sanchez, Joseph Horne, Brian Kennedy (Employment – Benefits and Compensation), Myra Sutanto Shen (Tax), Erik Franks, Dana Hall (Finance), Anne Seymour (Regulatory and Compliance), Lawrence Perrone (FCPA) and Martin Sul (Environmental).

Cravath advised Orbotech with a team including Richard Hall and LizabethAnn R. Eisen, Mark Mushkin and Virginia M. Anderson on M&A matters; partner Eric W. Hilfers, senior attorney M. C. Tania Balthazaar and associates Michelle M. Garrett and Peretz Riesenberg on executive compensation and benefits matters; partner David J. Kappos and practice area attorney Anthony N. Magistrale on intellectual property matters; partner Christopher K. Fargo and associate Kiran Sheffrin on tax matters; partner Matthew Morreale on environmental matters; and partner Christine A. Varney, senior attorney Jesse M. Weiss and associate Kate F. Stamell on antitrust matters. Emily C. Weiss also worked on M&A matters and Joel Feigenbaum worked on intellectual property matters.

 

Involved fees earner: Bradley Finkelstein – Wilson Sonsini Goodrich & Rosati; Douglas Schnell – Wilson Sonsini Goodrich & Rosati; John Olson – Wilson Sonsini Goodrich & Rosati; Emma Sarkisyan – Wilson Sonsini Goodrich & Rosati; Brian Chan – Wilson Sonsini Goodrich & Rosati; John McGaraghan – Wilson Sonsini Goodrich & Rosati; Barath Chari – Wilson Sonsini Goodrich & Rosati; Scott McCall – Wilson Sonsini Goodrich & Rosati; Brandon Gantus – Wilson Sonsini Goodrich & Rosati; Briza Sanchez – Wilson Sonsini Goodrich & Rosati; Joseph Horne – Wilson Sonsini Goodrich & Rosati; Myra Sutanto Shen – Wilson Sonsini Goodrich & Rosati; Erik Franks – Wilson Sonsini Goodrich & Rosati; Dana James Hall – Wilson Sonsini Goodrich & Rosati; Martin Sul – Wilson Sonsini Goodrich & Rosati; Anne Seymour – Wilson Sonsini Goodrich & Rosati; Lawrence Perrone – Wilson Sonsini Goodrich & Rosati; Richard Hall – Cravath Swaine & Moore; LizabethAnn R. Eisen – Cravath Swaine & Moore; Mark Mushkin – Cravath Swaine & Moore; Virginia Anderson – Cravath Swaine & Moore; Eric Hilfers – Cravath Swaine & Moore; Tania Balthazaar – Cravath Swaine & Moore; Michelle Garrett – Cravath Swaine & Moore; Peretz Riesenberg – Cravath Swaine & Moore; David Kappos – Cravath Swaine & Moore; Anthony N. Magistrale – Cravath Swaine & Moore; Christopher K. Fargo – Cravath Swaine & Moore; Kiran Sheffrin – Cravath Swaine & Moore; Matthew Morreale – Cravath Swaine & Moore; Christine Varney – Cravath Swaine & Moore; Jesse Weiss – Cravath Swaine & Moore; Kate Stamell – Cravath Swaine & Moore;

Law Firms: Wilson Sonsini Goodrich & Rosati; Cravath Swaine & Moore;

Clients: Orbotech Ltd.; KLA-Tencor Corporation ;

 

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Author: Ambrogio Visconti