Lam Buying Novellus for $3.3 Billion in Stock

Wafer fabrication equipment supplier Lam Research (LRCX: 37.91, -1.57, -3.98%) unveiled a $3.3 billion all-stock buyout of Novellus (NVLS: 42.04, +7.34, +21.15%) late Wednesday in a deal that carries a 28% premium on the chip equipment maker.

Under the terms of the deal, Lam said it will pay 1.125 shares of its stock for each Novellus share held, translating to $44.42.

Fremont, Calif. based Lam said the acquisition is expected to add to its bottom line within one year of closing, which is expected to occur in the second quarter of 2012. Lam said it sees total cost synergies of about $100 million a year beginning in the fourth quarter of 2013.

"This strategic combination positions Lam Research to lead the development of next-generation semiconductor manufacturing technology and productivity solutions at a time when growing semiconductor demand and increased device complexity are creating significant business opportunities," LAM CEO Steve Newberry said in a statement.

Once the deal closes, Lam shareholders will own about 59% of the combined company, while Novellus shareholders will own 41%. Incoming CEO Martin Anstice, who is taking over for Newberry on January 1, will continue as CEO of the combined entity.

“The complementary skills, technologies and product offerings of Lam and Novellus will create a strong platform for delivering innovative and cost-effective solutions,” said Novellus CEO Richard Hill.

Lam also revealed plans for a $1.6 billion stock buyback program that will replace the current one.

Goldman Sachs (GS: 93.48, +0.23, +0.25%) acted as Lam’s exclusive financial advisor on the acquisition, while Novellus was advised by Bank of America Merrill Lynch (BAC: 5.25, +0.02, +0.41%).

Shares of Novellus soared 23.05% to $42.70 ahead of the open, while Lam slid 2.20% to $38.61.