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Advantest to buy Verigy for $1.1B

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By eeNews Europe

At least on paper, the Advantest-Verigy deal makes sense. Japan’s Advantest needs to expand its digital/logic ATE efforts. Verigy is strong in digital ATE. Advantest is a smaller player in the arena, although it has a largest installed base at Intel Corp.

In logic ATE, Advantest sells the T2000, which has been a disappointment outside of Intel. In the same market, Verigy sells the 93000, which is getting long in the tooth. For now, Advantest will support both the T2000 and 93000.

Advantest and Verigy also sell memory testers. Advantest is strong in DRAM and flash. Verigy is strong in flash. So there is some overlap in the arena.

All ATE vendors are trailing Teradyne Inc., which continues to gain steam in logic, memory and other markets. ”With still uncertain timing around regulatory approval and whose test platforms will win out in the combined test entity (particularly in flash and high speed memory test), we believe that Teradyne will enjoy incremental market share gains at the expense of erigy/Advantest in the coming months, providing further support for Teradyne as our top pick in back end. As for LTX-Credence, we believe a more consolidated sector will have limited impact on the company’s business model, as its primary competitor in its core analog/mixed signal market remains Teradyne,” said C.J. Muse, an analyst with Barclays Capital, in a report.

As reported, Verigy recently moved to buy rival LTX-Credence Corp. Verigy itself was formerly part of Agilent Technologies (before that, the ATE group was part of Hewlett-Parkard). Agilent spun-out the ATE unit several years ago, thereby forming Verigy. Several years ago, LTX Corp., bought ATE rival Credence Systems Corp., forming LTX-Credence.

Then, late last year, Japanese ATE giant Advantest increased its bid to buy rival Verigy. U.S.-based Verigy recently received a revised proposal from Advantest to acquire all of the outstanding Verigy ordinary shares for $15.00 per share in cash. That deal was valued at about $900 million.

Recently, Verigy said it notified LTX-Credence that the Verigy board of directors intends to withdraw its recommendation in favor of the pending merger transaction between Verigy and LTX-Credence and intends to recommend that Verigy stockholders vote against the issuance of Verigy ordinary shares in connection with the proposed merger with LTX-Credence.

Verigy also announced that its board has unanimously determined that a proposal from Advantest to acquire all of the outstanding Verigy ordinary shares for $15.00 per share in cash constitutes a "superior offer" within the meaning of the definitive merger agreement between Verigy and LTX-Credence previously announced on Nov. 18, 2010.

Advantest’s $15.00 per share cash offer represents a premium of approximately 64 percent to Verigy’s closing stock price on Dec. 3, 2010, the day prior to Verigy’s announcement that it had received an offer from Advantest.

"Through the acquisition of Verigy, we will be able to offer stronger product lines to our diversified customer base in both Memory and SOC, and we will be well positioned to become a global leader in those fields,” said Haruo Matsuno, Advantest president and CEO, in a statement.

"With this acquisition, Advantest will benefit greatly from Verigy’s technology development capabilities and technical talent which support its proven technologies on a global scale. The acquisition will allow us to better and more timely respond to customer needs in the ATE business,” he said.

The transaction will be structured as a scheme of arrangement under Singapore law, and is subject to the approval of Verigy shareholders as well as other customary conditions, including approvals from relevant regulatory authorities and the Singapore Court. As previously announced by Verigy, the Department of Justice (DOJ) issued a second request in connection with the transaction. Both companies and their advisors are working closely with the DOJ to comply with the second request expeditiously.


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