UPDATE 4-Chip gear maker ASML buys Cymer for $2.5 bln

Wed Oct 17, 2012 2:35pm EDT

* Cymer buy key to development of future smartphone chips
    * ASML 3rd-qtr net profit 275 mln euros vs 278 mln forecast
    * Sees 4th-qtr sales of about 1 bln euros
    * ASML shares close down 5.25 pct


    By Roberta Cowan
    AMSTERDAM, Oct 17 (Reuters) - ASML, the world's
leading provider of tools for making computer chips, is buying
U.S. group Cymer for 1.95 billion euros ($2.5 billion)
to get control of a light-based technology crucial to making 
smaller, smarter chips of the future.
    The Dutch company said that the cash-and-shares acquisition
would speed up the development of extreme ultraviolet (EUV)
semiconductor lithography, which will help produce chips to
power future generations of smartphones and tablet computers. 
    It is upgrading its machines to produce these smaller,
faster chips. In July, it sold a 23 percent stake to its three
biggest customers, Intel, Samsung Electronics
 and Taiwan Semiconductor Manufacturing, to
help finance research into the technology behind its new
equipment. 
    ASML and San Diego-based Cymer have both been working on EUV
technology but progress has been slow.
   "Combining the two companies will definitely speed up the
development of this EUV source," said Chief Financial Officer
Peter Wennink."
    ASML's funding for the Cymer acquisition, its biggest, will
be three-quarters shares and one-quarter cash. Cymer
shareholders will receive $20 in cash per Cymer share plus
1.1502 ASML shares. 
    The total price is a premium of 61 percent to Cymer's recent
share price. Cymer's shares jumped 48.80 percent to $71.16 on
the Nasdaq.
    ASML will pay the $630 million cash component from its 3
billion euros of available reserves and issue new shares for the
rest, an ASML spokesman said. 
    The deal might face scrutiny from antitrust regulators since
Japan's Nikon, a key AMSL competitor in lithography, is
a customer of Cymer's current technologies, DUV and IBP, said
Steifel Nicolaus analyst Patrick Ho.
    "By acquiring Cymer and their core DUV and IBP business, 
that would be selling products to their direct competitor in
Nikon. That's obviously an awkward situation," Ho said.
    Rabobank analyst Peter Scholte said the deal, which is due
to close in the first half of next year, highlights the
difficulties in EUV development and is an expensive way for ASML
to get it back on track. 
    ASML said that the deal is expected to boost earnings per
share within two years. Bernstein analyst Pierre Ferragu said
assuming the deal closes by next March, he'd expect earnings to
be diluted for the year by around 4 percent.
    Analysts said they did not expect the deal to lead to other
acquisitions because ASML's and Cymer's leadership in EUV is
unique.
    "This is a one-of-a-kind deal triggered by EUV, which is not
even a product yet. EUV is pretty much down to ASML," said RBC
Capital Markets analyst Mahesh Sanganeria.
             
 
    
    DOWNBEAT MESSAGE
    ASML, a bellwether for Europe's technology sector, also
reported lower-than-expected third-quarter orders and said
fourth-quarter sales would be at the low end of forecasts. It 
declined to give a 2013 outlook.
    Its trading update echoed the downbeat message from 
technology peers. Intel, one of ASML's biggest
customers, said on Tuesday that its outlook remained weak for
the rest of the year because of falling computer sales.
    Earlier this month research firm Gartner said that worldwide
industry spending on chip equipment would slow in 2013 because
of deteriorating economies.  
    ASML's third-quarter order book was 831 million euros, lower
than the 899 million euros analysts had forecast.
    Third-quarter net profit was 275 million euros, compared
with a forecast 278 million euros.
    Shares of ASML, which has a market share of more than 80
percent, and competes with Japanese groups Canon and
Nikon, hit a record high of 48.34 euros in July after the deal
with its top customers. They closed down 5.25 percent at 39.145
euros on Wednesday.