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Breakingviews: Diplomatic deal-making

Tuesday, September 24, 2013 - 03:40

Sept. 24 - Jeffrey Goldfarb and Breakingviews columnists discuss the unique structure and tactics in the $29 bln merger between U.S.-based Applied Materials and the Japanese Tokyo Electron.

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We are big 29 billion dollar deal on a pretty I'm sexy industry sort of building equipment effort to make chips. But it has all kinds of interesting details and other ways -- -- applied materials Tokyo electron. Why is still so significant well you can see why the companies want to get into it on their fewer companies buying equipment that means they need to pricing power. The problem is -- how'd you arrange a cross border deal between the Japanese company in America Monday that. Simply isn't normally done. And they've done very interest in careful waited besides the Japanese cultural things by saying yeah. The PR. The press release is very clear thing you know customers will -- this deal. You know consumers will do fantastically. Don't -- -- financial stuff and others for the American investors there's the there's the synergies and cost him down here -- our our our our CEO's getting. Be the head of the -- -- he has been moved Tokyo there's going to be the boards and we split evenly between huge companies. It's all very carefully done so that the Japanese investors a lot of diplomacy here I mean I mean idea -- stay part of that is in fact they have. It's in the governance and particularly given away applied materials and our numbers actually you're gonna right what do you would expect. At least on the valuations they've picked. The American sailors that ultimately will have 68 since the new company in the Japanese that he too so that's -- two to one. And if the board's going to be in the mode as basic going to be even between the two so -- so -- that salmon is going to be that -- of the Japanese company right. Two as it happens is in the in the C the American company for thirty years which makes this. Still it may not be. Reputable. Other people but there are nonetheless it it it seems to show I don't know how you can address some of these culturally -- contrast. The totally different thing of course the contrast with. The very -- And I don't Kenya face a lot of control the -- inviting way that -- went off the same name -- -- activist him and it did different. Scenario but you know it that's not generally productive in Japan -- at the same time. The Japanese government's. Other people in Japan saying you know you have to mobile. Logical businesses have to do do you have to think in a way that makes financial sense. This cultural system this is like one of the first deals in that step and talk about our economics in this sport maybe part of a a broader tangential piece of -- of the structural reforms companies and the electronic companies actually have been kind of rationalize and an editor in a very Japanese. -- is kind of pared down their offerings to team a couple of the deals. But you know much much cooler than average American company which they would you know. -- go with companies like. All the parties toasters for instance or our our you know like it did right after combatant -- plant evidence -- you know it we're number one in this business for me you know that Jack Welch there. And -- -- kind of this this is interesting because you're seeing -- a westernized. Japanese companies merging with an American -- and their presumably in the much more financially summit at the end of the -- -- I -- you do have this question any merger needs to sort of justify itself -- more financially to its shareholders. You know is is there because a lot of synergies in the -- -- and others and that there's an energy but the pricing power seems to be key deal. I'm you know antitrust could actually be questioned because these companies do you have although they're very specialized kind of energy that you have a big -- -- And that's very important for a lot of companies and the government -- are a lot of good elements than it is interesting deal will be back with more breaking news tomorrow.

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Breakingviews: Diplomatic deal-making

Tuesday, September 24, 2013 - 03:40

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