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KLA completes long-awaited acquisition of Orbotech

Feb. 20, 2019
Nearly a year after a deal was initially announced, semiconductor equipment and services supplier KLA Corp. has completed its purchase of automated optical inspection equipment vendor Orbotech.

“We are very pleased to have completed the acquisition of Orbotech," KLA president and CEO Rick Wallace said in a press release. "This new combination extends KLA's market reach within the electronics value chain, opens new high-growth markets for the company, and brings complementary technologies, products, and services to our portfolio."

The acquisition terms state that Orbotech shareholders received $65.93 per share in total consideration, down from the $69.02 per share in the initial agreement.

On March 19, 2018, Milpitas, CA-based KLA-Tencor—which changed its name to KLA Corp. effective Jan. 10 of this year—and Yavne, Isreal-based Orbotech co-announced an agreement had been reached in which Orbotech was valued at approximately $3.4 billion in equity.

The deal was soon met with antitrust interest and gained approval by South Korea in June, 2018, but the transaction came to a halt during a lengthy review by Chinese authorities, with delays due to the trade war between China and the United States. According to Isreal Business News publication Globes, more than 30% of Orbotech’s trade is with China.

On Dec. 24, KLA provided a status update, saying it an Orbotech were continuing to pursue merger clearance with China, and on Feb. 17, the two companies announced they had achieved such approval from Chinese antitrust regulator SAMR. Originally scheduled to close in late 2018, the acquisition was finally and officially completed Wednesday.

"We welcome the talent and experience that Orbotech employees bring to the KLA team,” Wallace said. “Working together, we will continue to grow and invest in our future as we drive innovation and results, and meet the changing needs of our customers and the marketplace."

KLA’s portfolio includes products and services in the areas of process control systems for production of water, reticle, integrated circuit, and other nanoelectronics solutions. It partners with customers to develop inspection and metrology technologies.

In KLA’s full-year 2018—which ended June 30, 2018—the company had total sales of $4.037 billion, up 16.0 percent from 2017, and it turned a total profit of $802.3 million. Its two operating segments—product, and service—comprised 78.3% and 21.7% of business, respectively. Of KLA’s 2018 sales, approximately 29% came from Korea; 16% from China; 16% from Japan; 16% from Taiwan; 12% from North America; 7% from Europe and Israel; and 4% from the rest of Asia.

KLA reported its 2019 second quarter fiscal results on Jan. 29, showing that Q2 sales of $1.12 billion increased 14.8% year-over-year, while Q2 profit was $369 million.

Orbotech provides yield-enhancing and process-enabling solutions for the manufacture of electronics products. It is a vendor of solutions in the production of printed circuit boards, flat panel displays, and semiconductor devices, designed to enable the production of innovative, next-generation electronic products and improve the cost-effectiveness of existing and future electronics production process.

The company’s website states: “Orbotech’s core business lies in enabling electronic device manufacturers to inspect and understand PCBs and FPDs and to verify their quality (‘reading’); pattern the desired electronic circuitry on the relevant substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces (‘writing’); and utilize advanced vacuum deposition and etching processes in SD and semiconductor manufacturing (‘connecting’).”

The vast majority of Orbotech’s business comes via its Production Solutions for Electronics Industry segment. The company’s latest fiscal report was on Nov. 7 for its 2018 third quarter, in which total sales of $261.2 million grew 6.3% year-over-year and profit was $29.2 million. Orbotech hasn’t reported its Q4 results, but its Q3 report forecasted Q4 sales of $270 million, for a full-year 2018 total revenue of $1.05 billion, up 17% year-over-year.

This certainly isn’t the only recent acquisition for KLA. It closed three deals in 2018 alone, purchasing MicroVision, Nanomechanics, and the Nano Indenter product line from Keysight Technologies. It acquired Zeta Technologies in 2017, and Luminescent Technologies in 2014.

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