Nanometrics and Rudolph agree merger

Process control metrology and software analytics provider Nanometrics Inc of Milpitas, CA, USA and Rudolph Technologies Inc of Wilmington, MA, USA (which makes lithography equipment, process control systems and process control software for semiconductor and advanced packaging device makers) have agreed to combine in an all-stock merger, forming an end-to-end metrology, inspection, process control software and lithography equipment provider for the semiconductor industry and other advanced markets.

As unanimously approved by the boards of directors of both companies, Rudolph stockholders will receive 0.8042 shares of Nanometrics common stock for each Rudolph share. On completion of the merger, current Nanometrics stockholders will own about 50% and Rudolph stockholders will own about 50% of the combined company.

Rudolph’s CEO Michael Plisinski will serve as CEO and its chief financial officer Steven Roth will be CFO of the combined firm, alongside a leadership team consisting of executives from both companies. The board will be led by Nanometrics’ director Christopher Seams and will have 12 directors, consisting of six from each existing board. The combined firm will be headquartered in Wilmington and maintain a strong presence at Nanometrics’ headquarters in Milpitas.

“Nanometrics has a long history of innovation in the field of optical metrology, pioneering the use of scatterometry for semiconductor process control,” says Nanometrics’ president & CEO Pierre-Yves Lesaicherre. “In recent years, we have established a strong position in optical critical dimension metrology, enabling the ramp of advanced technology nodes by each of the major semiconductor manufacturers worldwide.” The merger marks “the culmination of our respective businesses’ growth, diversification and increased scale,” he adds. “The combined global support organizations, technology development teams and product portfolio will create a unique, end-to-end solution provider across the entire semiconductor fabrication process. The combined company will be able to provide improved device yield at reduced manufacturing cycle time, supporting the accelerated product life cycles in the semiconductor and other advanced markets,” he believes.

“This strategic transaction brings together two successful and complementary teams and product portfolios,” says Rudolph’s CEO Michael Plisinski. “Nanometrics’ metrology portfolio is a strong strategic fit with Rudolph’s current diversified product lines including software, inspection, metrology and lithography. Our current set of products has already created integrated solutions for the advanced packaging market, and we expect to develop new integrated solutions for customers as we are able to draw from an even larger set of products in the future,” he adds. “Our customers are consolidating and rapidly innovating across the complete value chain from front-end fabrication to packaging. Bringing these two successful and complementary teams together enables us to solve our customers’ high-value problems in the years ahead.”

The merger joins together two highly complementary inspection and metrology companies. Benefits are expected to be as follows:

Complementary products: By bringing together front-end metrology with inspection solutions, it is believed that the new company will have the opportunity to offer more comprehensive process control solutions. These served markets are also complementary, as the combined product portfolio provides tools and software to those producing advanced nodes and specialty devices in the front-end along with advanced packaging in the back-end. As customers continue to invest in more advanced process control solutions, the combined technology portfolio and established channels to these markets is expected to accelerate the ability to serve both front-end and back-end markets.
Increases served markets: Each firm currently has a semiconductor industry SAM of at least $1bn, with additional SAM (serviceable addressable market) expansion opportunities of $400-500m per company. The combination is expected to expand this to about $3bn. With each firm’s capabilities in their respective served markets, the merger is expected to strengthen the combined team’s opportunity to grow their share of the combined SAM and invest in future expansions.
Global scale: The combined firm’s broader, global scale (with locations and facilities across the USA, China, Europe, Japan, South Korea, Singapore and Taiwan) is expected to enable it to better invest, compete and provide innovative services to the customer base. Collectively, Nnometrics and Rudolph had about $600m in revenue and $118m in operating income based on 2018 results. In addition, at the end of first-quarter 2019, the firms had combined cash and marketable securities of $319m, working capital of $526m and no debt.
Strong cash generation: In 2017 and 2018 the firms generated a collective $223m in cash flows from operating activities. The combination is expected to enhance free cash flow generation of the merged enterprise, resulting in a stronger cash position to enable strategic capital deployment.
Increased shareholder value: The combined firm is expected to drive long-term shareholder value through cost synergies and revenue growth opportunities. Annual cost synergies of at least $20m are expected, primarily from elimination of duplicate public company costs, elimination of redundant facility leases, and other general administration areas. The firms expect additional potential upside from revenue synergies through cross-selling and software modules.

The transaction is expected to close in second-half 2019 (subject to the completion of customary closing conditions, including receipt of regulatory approvals, and approval by the stockholders of each company).

Tags: Nanometrics Rudolph Metrology

Visit: www.nanometrics.com

Visit: www.rudolphtech.com