Chip gear maker ASML to buy Cymer for $2.5 billion

The world's leading microchip gear maker ASML, is to buy U.S. group Cymer, its key supplier of a light-based technology crucial to making a new generation of much smaller chips, for 1.95 billion euros ($2.5 billion).

The Dutch company said that Cymer would accelerate the development of extreme ultraviolet (EUV) semiconductor lithography, which will produce the chips that will increase power and functionality in future smartphones and tablet computers. The light source in ASML's EUV development plans has been an ongoing technological challenge for ASML, causing delays in production

Over the summer, ASML announced a string of deals with its three biggest customers, including Intel, Samsung Electronics and Taiwan Semiconductor Manufacturing. These will amount to the trio buying a collective 23 percent stake in ASML and supplementing its R&D budget to the tune of 1.38 billion euros.

Cymer and ASML have collaborated closely for more than a year and the acquisition was a natural evolution, ASML said.

The deal, which is due to close in the first half of 2013, is a cash-and-stock transaction. Each Cymer shareholder will receive $20 in cash and 1.1502 ASML ordinary shares per Cymer share. The total price is a premium of 61 percent over Cymer's average volume-weighted price in the 30 days to October 16.

ASML said that the deal is expected to boost earnings per share within two years, though Theodoor Gilissen analyst Jos Versteeg said that ASML is paying a steep price. Rabobank's Philip Scholte, meanwhile, said that it's an expensive way for ASML to get EUV back on track.

A bellwether for Europe's technology sector, ASML made the Cymer announcement as it reported lower than expected third-quarter bookings and said that fourth-quarter sales would be at the low end of expectations. However, it declined to give a 2013 outlook.

Its trading update echoed the downbeat message coming from other technology titans. Intel, one of ASML's biggest customers, said on Tuesday that its outlook remains weak for the remainder of the year because of falling PC sales.

ASML's third-quarter order book came in at 831 million euros, lower than analysts' expectations of 899 million euros.

The company saw weakness at customers who make memory chips because consumers were choosing cheaper versions of smartphones and tablet computers because of the weak economy, Chief Financial Officer Peter Wennink said.

Third-quarter net profit was 275 million euros, compared with a forecast for 278 million euros. Sales of 1.23 billion euros were in line with forecasts.

Petercam analyst Marcel Achterberg said that he expected ASML shares to fall on the news and would recommend buying on this weakness. The shares were down by 2.75 percent at 0827 GMT.

($1 = 0.7679 euro)

(Additional reporting by Gilbert Kreijger; Editing by David Goodman)