Tokyo Electron shares sink after takeover by Applied Materials scrapped

By Reuters

Apr 28, 2015 08:24 AM EDT

Tokyo Electron Ltd (8035.T) shares plunged 15 percent on Tuesday to a six-month low after U.S. regulatory opposition forced the scrapping of its planned takeover by U.S.-based Applied Materials Inc (AMAT.O).

The all-share purchase - a rare foreign bid for a Japanese firm - would have combined the No.1 and No. 3 makers of the equipment that makes semiconductor chips into a group with a stock market value of more than $38.5 billion.

Analysts had initially expected the takeover, aimed at spurring profit growth in both companies, to stand up to regulatory scrutiny.

Tokyo Electron shares fell as much as 14.8 percent in early trade to 6,555 yen, hitting their lowest level since late October, while the broader Tokyo market .TOPX was up 0.6 percent.

The slide came despite Tokyo Electron announcing it plans to buy as much as 120 billion yen ($1 billion) worth of shares, or 8.59 percent of its outstanding stock.

A Tokyo-based mergers and acquisitions lawyer said the unraveling of the deal was worse for Tokyo Electron as takeover targets often lose management focus, and customers, during the negotiation period.

Applied Materials, Tokyo Electron and No. 2 maker, ASML Holding NV (ASML.AS), hold 49 percent of the global market, according to market research firm Gartner, in an industry where the rising cost of developing chips, coupled with slowing semiconductor demand, are forcing alliances and acquisitions.

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