Lam Research, KLA-Tencor Shares Fall Amid Deal Status Concerns

Lam Research Corp. and KLA-Tencor Corp. said they may not obtain all the needed approvals from antitrust regulators in time to complete their merger plan by their target date of Oct. 20.

Shares of both semiconductor-manufacturing equipment makers fell Wednesday as the companies said they remain in talks with regulators in the U.S., Korea, Japan and China, but provided few details about their progress or what they plan to do if they don't receive the needed clearances by the October date.

Shares of Lam Research fell 5.2% to $88.44 and KLA-Tencor shares dropped 11% to $69.21 in afternoon trading Wednesday.

At first glance, any opposition to the merger on antitrust grounds would seem surprising, as the two companies dominate different segments of the market for machines used to make chips.

Lam is the biggest seller of tools to etch away materials from silicon wafers as part of the manufacturing process. KLA-Tencor is the leader in a different series of steps, offering machines to help inspect and measure chips to check for defects.

But Dan Hutcheson, an analyst at VLSI Research, said concerns could be raised if one company controlled both categories of equipment. Lam, for example, could obtain information from KLA-Tencor tools about defects or other aspects of the production process not available to its competitors, he said.

Slowing growth and rising costs drove a historic wave of consolidation in the semiconductor industry that kicked into high gear last year and has continued this year.

In October, Lam Research unveiled a deal, initially valued at rough $10.6 billion, for rival KLA-Tencor that would create a combined company with $8.7 billion in annual revenue.

The move followed the cancellation in April of Applied Materials Inc.'s plan to buy the Japanese company Tokyo Electron Corp., after the Justice Department raised antitrust objections to the transaction. That deal, announced in September 2013, was expected to create a company with a market value of $29 billion.

In May, Lam Research and KLA-Tencor received a second request for information from the Justice Department. The notice is a fairly standard request as the agency explores competitive concerns but serves to delay the deal's closing.

Write to Tess Stynes at [e-mail] and Don Clark at [e-mail]

(END) Dow Jones Newswires

August 10, 2016 15:35 ET (19:35 GMT)

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