UPDATE 1-Axcelis shareholder opposes directors' election
(Adds details about deal and election; closing stock price; byline)
SAN FRANCISCO, March 28 (Reuters) - Sterling Capital Management, a large shareholder of Axcelis Technologies Inc (ACLS.O), said on Friday it will withhold its vote in the upcoming election of three directors because of differences in how Axcelis's board views a $6 a share buyout offer from Japan's Sumitomo Heavy Industries Ltd (6302.T).
"We believe that SHI represents the most logical acquirer of Axcelis from both a strategic and financial perspective," said Brian Walton, Sterling's managing director, in a letter to Axcelis.
Japan's Sumitomo made a bid to buy the U.S. semiconductor equipment maker for $532 million last month, but later sweetened its offer to $615.6 million. U.S. private equity firm TPG is a minority partner in the bid and plans to provide some financing.
Axcelis has rejected the bid, saying it undervalued the company and failed to compensate it for the future potential of new products.
Last month, Sterling said $7-$7.50 per share is a fair price for Axcelis and asked the company to proactively solicit other potential bidders.
In Friday's letter, Walton said Sterling is concerned Axcelis may be embracing an "instrinsic value which is not achievable," preventing it from holding a full dialogue with Sumitomo.
Axcelis has said it is willing to meet Sumitomo to discuss ways to handle a joint venture in Japan, known as SEN. One way might be through an acquisition by Axcelis of Sumitomo's stake in SEN.
Sterling said in the letter they do not believe such a plan is in the best interest of Axcelis shareholders.
"Because of these significant differences, we find it difficult to support the three candidates who have been nominated for reelection to the Axcelis board of directors," Walton wrote.
Axcelis' corporate bylaws say any board nominee who has a greater number of votes withheld than in support will have to resign.
Axcelis shares closed Friday's session down nearly 1 percent at $5.40 on Nasdaq. (Editing by Andre Grenon)
