Entegris Inc, a supplier of semiconductor materials, said on Wednesday it would buy smaller rival CMC Materials in a deal valued at $6.5 billion, as it looks to build scale amid an unprecedented global chip shortage.
Semiconductor-related businesses have been consolidating, with companies looking to scale up to invest in R&D and manufacturing to meet burgeoning demand.
CMC shareholders will receive $133.00 in cash and 0.4506 shares of Entegris common stock for each share they own. Based on Reuters’ calculations, the cash-and-stock portion of the offer is valued at $197.36 per share, or $5.61 billion, a premium of about 35% to CMC’s Tuesday close.
Shares of CMC surged 33% on Wednesday. Entegris shares initially tumbled about 6% but pared most losses by the close of trading.
“This deal will add to Entegris’s portfolio, making them more of a one-stop shop in the semiconductor materials space,” analysts at Citigroup wrote in a note.
Entegris said it does not believe the deal would raise antitrust concerns during regulatory review in several countries, including China.
Entegris, based in Billerica, Massachusetts, supplies materials to major chipmakers including Taiwan Semiconductor Manufacturing and Samsung . Its stock has nearly tripled since the beginning of 2020 and the company has been looking for M&A opportunities.
The deal will be financed with a combination of shares issued to CMC Materials, new debt and cash on hand, the companies said in a joint statement, adding Entegris had obtained fully committed debt financing from Morgan Stanley Senior Funding Inc. They expect to close the deal in the second half of 2022.
Morgan Stanley & Co. LLC was Entegris’ financial adviser and Skadden, Arps, Slate, Meagher & From LLP was its legal counsel. Goldman Sachs & Co. LLC acted as a financial adviser to CMC and Wachtell, Lipton, Rosen & Katz was its legal counsel.
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