June 26, 2008 / 1:10 PM / 10 years ago

UPDATE 2-Israel's Orbotech to buy Photon Dynamics for $290 mln

(Recasts; adds details, share movement)

June 26 (Reuters) - Israel’s Orbotech Ltd (ORBK.O) agreed to acquire Photon Dynamics Inc PHTN.O, a maker of flat-panel display test, inspection and repair equipment, for about $290 million to bolster its flat panel display business.

Orbotech, which makes equipment used in inspecting circuit boards and flat display panels, will pay $15.60 for each Photon share -- a premium of 35 percent over the stock’s closing price of $11.56 Wednesday.

Photon’s two main products, thin film transistor-liquid crystal display (TFT-LCD) array test and repair, do not overlap with Orbotech’s automated optical inspection portfolio, Maxim Group analyst Darice Liu wrote in a note to clients.

“This now makes Orbotech a yield management LCD equipment powerhouse,” said Liu. Yield management is a revenue maximization technique that helps increase returns.

She added that both the companies were poised to benefit from the increased demand for LCD panels.

LCD bookings have been strong since the fourth quarter of last year that should translate into higher revenue and earnings throughout 2008, the analyst noted.

    Boards of both the companies have approved the acquisition, which is expected to close in the second half of 2008.

    Lehman Brothers advised Orbotech, while Credit Suisse Securities advised Photon Dynamics on the deal.

    Photon shares were up 31 percent at $15.16 in afternoon trade, after touching an intraday high of $15.28, while Orbotech shares were down almost 5 percent at $14.25 both on Nasdaq. (Reporting by Kuganandhan Paramanandan in Bangalore; Editing by Deepak Kannan, Anil D‘Silva)

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