Applied Materials Inc.’s plan to buy Kalispell-based Semitool Inc. for $364 million was hailed Tuesday by both companies as a collaborative move that will allow Applied to broaden its range of products and take advantage of a global recovery in the semiconductor industry.
“As part of Applied Materials, we can accelerate the global adoption of the technologies Semitool has developed,” Semitool founder and chairman Ray Thompson said in a prepared statement.
“With this agreement we are providing our employees with a strong future and our stockholders with exceptional value.”
In the acquisition expected to be finalized by the end of the year, Semitool will become a business unit of Applied Materials, Semitool attorney Richard Hegger said.
Details about how Semitool employees’ futures will play out in the deal have not yet been disclosed, but Hegger said Semitool looks at the buyout “as a very positive development” that will combine the strengths of both companies.
“It’s anticipated they [Applied] will maximize the strengths of our manufacturing ability,” Hegger said.
Applied Materials, based in Santa Clara, Calif., and Semitool once were competitors in the manufacturing of wafer processing equipment for the semiconductor industry, but now the products offered by the two companies complement each other, Hegger said.
Randhir Thakur, senior vice president and general manager of Applied’s Silicon Systems Group, said the two companies “have a strong track record of collaborating to develop equipment solutions for leading chip makers.
“Together with Semitool’s people and products, we can help the industry move to smaller form factors and faster, lower power chips,” Thakur said in a press release.
Mike Splinter, chairman and chief executive officer of Applied Materials, said the semiconductor industry recovery is being fueled by global demand for mobile devices such as smart phones, notebook personal computers and portable media players.
A group of Applied Materials executives was at Semitool’s Kalispell facility on Tuesday to talk to employees about an integration process that will take several months, Hegger said.
Semitool employs 825 people worldwide, with 550 of those employees based at three facilities in the Libby and Kalispell areas, including the firm’s headquarters on West Reserve Drive.
The caliber of the Flathead Valley work force was a drawing card for Thompson when he started Semitool here 30 years ago.
He wanted to find good employees and considered Montana the best place to do it, even though his peers in the industry thought he was nuts to start a tech company in such a remote area, he said in an earlier interview with the Daily Inter Lake.
Industry peaks and valleys have prompted fairly routine layoffs and rehirings through the years. Lagging customer orders and a sluggish global economy late last year forced Semitool to furlough much of its work force for three weeks over the Christmas and New Year holidays.
Late last year and early this year Semitool eliminated 300 local jobs.
Montana West Economic Development intends to take an immediate role in reaching out to Applied Materials to promote the Flathead Valley’s business assets, Montana West President and CEO Kellie Danielson said.
“We believe that Applied will find opportunities in the Flathead because of the talent here,” Danielson said. “We want them to know the benefits of the opportunities here and the support they’ll get from us. As soon as the dust settles we [and state economic development officials] will be doing some outreach, engaging with them, so they see how important Semitool is to the Flathead and Montana.”
APPLIED’s all-cash offer to buy Semitool works out to $11 a share, a 31 percent premium above Semitool’s Monday closing share price of $8.40. Semitool shares increased to $11.02 in trading on Tuesday, while Applied’s stock dropped slightly to $12.94 per share.
For the deal to be approved, Applied Materials needs two-thirds of Semitool shareholders to accept the offer, which the companies expect to close by the end of the year.
About 32 percent of Semitool’s shares are held by its directors and executives, who already have agreed to the sale.
Applied Materials last week announced solid fourth-quarter results, with net sales of $1.53 billion and net income of $138 million. For the fiscal year ending Oct. 25, the company reported net sales of $5 billion and a net loss of $305 million.
Semitool’s fourth-quarter revenue was $47.1 million, compared to $31.8 million in this year’s third quarter and $60.1 million in the fourth quarter last year. Fourth-quarter bookings were $71.7 million, up 120 percent from the third quarter, and up 102 percent over the fourth quarter a year ago.
“The fourth quarter represented our strongest equipment bookings period in more than three years, and was the third-best quarter in Semitool history,” said Larry Murphy, president and chief operating officer.
For the full fiscal year, revenue was $139 million versus revenue of $238.6 million in fiscal 2008. Net loss was $11.4 million, versus net income of $6 million last year.
Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at lhintze@dailyinterlake.com
anniemay
I just wish the new company would pay a living wage. Having it leave the Valley would be a blessing If they pay like simitool. The people that work there qualify for food stamps. We as tax payers should get a kick back from the sale- we have been helping the company for years.
petals
montana's labor laws are the most pro-employee in the nation, hence pro-union. unfortunately, corporations fly right over us to n. dakota, idaho, or any other state with friendlier employment laws. it's not necessarily taxation issues, but the fact that montana is the hardest state to fire an employee in. also, the costs companies pay per employee is the highest: work comp, etc.
i sincerely hope they leave things as they are. but of course they wouldn't disclose their business plan! once they own it, they can do as they wish. they won't keep it in the flathead for sentimental reasons. if they can't manage it economically here, they will go somewhere else. just the way business works.
Joe Bush
Anything that presents the possibility of keeping Thompson away from normal people is a good thing. See how far he gets trying to bully AMAT.
11deadunicorns
I think you are all off the mark. In everything that Applied Materials does, they don't do manufacturing. They farm it out, some of it to Semitool. They are buying a plant for research and development, also they are buying a manufacturing plant. I don't think they have any intentions of shutting it down, but instead pumping up the volume. Lets all try to not instantly go to the gloom and doom, and realize that this might be a good move for what is left of semitool employees. I don't t think that this will be anything but a lateral move for their employees. If you consider that in the past two years the employees have given up their vacation time , sick time, and stopped getting company 401k contributions. If nothing else, Applied Materials is still matching 401k contributions, so that in of itself is a lateral move.
I can not imagine that Ray would get involved in a deal that left this valley out of work. For as much as people are quick to bad mouth him, he does care about his employees. He will fly an employee all over the country looking for cancer treatments. He cares about the flathead valley retaining these jobs.
Try to think of the positive that can come out of this. Applied Mat has very good established products and customers. What they don't have is manufacturing. They are impressed with Semitools turn around time and work ethic.
Try to look at this for what it is, a big successful company buying a manufacturing facility that is struggling on its own , here in the valley. I wont go as far as to say that this company will be a night in shining armor, but it will bring well needed fresh eyes to the picture and can probably pull it out of its slump.
This does not have to be a big bad scary thing. Calm down. Relax. Just see what happens.
katorce14
BenRound I agree with much of what you say but tire of the old saw that we are taxing companies out of Montana. Look t up and you will see Montana has a fairly decent corporate tax structure. I do not believe corporations should be given a free pass. This trickle down nonsense is the reason we are in the pickle we are right now.
Instead try to name another state where the third largest county is connected to the outside world with an often crappy two lane roads where the average speed limit because of all the little towns is maybe 50.
Of course we are not likely to be the third largest now since I bet we lost 5 percent of our population during this economy and Great Falls has more stability as long as they can keep the base open.
If I were considering moving to Montana I would easily consider Bozeman or Missoula over the Flathead due to the universities, they are on the freeway, and airfare into Kalspell is a third higher than into Missoula.
In regards to Semitool i do not think it has much time let here. That is a shame
If i were looking at placing a business here
Mr BS Filter
As a Montana native who has worked for both Semitool and a supplier to AMAT, here's my take on the sale.
BenRound's comment about the cyclical nature of the semiconductor industry is correct, though there has always been an element of personal vendettas in play at Semitool that adds to the volatility. AMAT recently had a significant layoff. This is an industry that generally hates the idea of business forecasting and is rarely very accurate when they do it. They swing for the fences with every at-bat to keep Moore's Law alive. Home run hitters also strike out a lot and "boom/bust" is an accepted reality of the business, like it or not.
AMAT is the 800-lb gorilla of the semiconductor equipment industry. People in the Flathead are used to RT being "the man", but he amounts to a pimple on AMAT's rear end. AMAT did not make this move out of the goodness of their hearts to help the fine folks of the Flathead; they and their customers are quite ruthless - clearly SMTL has something they want. SMTL has history of coming up with creative, innovative ideas and doing a poor job of turning those good ideas into well-developed, quality products. That strategy is not likely to fly far with AMAT and an integration of the cultures would be far from seamless.
I see maybe 2 ways this deal could work for Kalispell. I don't believe either is likely.
1. AMAT takes the technology and staff they want and gives RT or somebody else the right to buy everything else back as a private company.
2. SMTL somehow convinces AMAT that NW Montana is an alternative to 3rd world labor - maybe through some combo of tax breaks and low wages. Even then I don't think they would stay in MT for long once they fully understand what a back-asswards operation they have and that the talent can't compare to Silicon Valley.
The more realistic guess is, AMAT bought a very specific proprietary technology to improve their position against a major competitor. They will keep some core staff that are critical to the technology, move them to Cali, pay off the SMTL officers nicely, and flush everything else. Or they will leave an SMTL divison alone for long enough to finish selected projects and support the installed base until their warranties run out - a slower death, but still...
Hope I'm wrong. Best wishes to all the good working folks at Semitool.
BenRound
Hate to dull the emotion with reality, but folks here are a few facts to chew on:
1. Layoffs - they don't happen because of Ray. They happen because of you. When things get tight and you stop buying new laptops, cell phone, flat screens, iPods, etc., the people that make them stop buying equipment to make more. That means Semitool stops selling equipment. Google "Applied Materials and layoffs" or "Novellus and layoffs". Sorry but you'll see these cycle are a characteristic of the industry, not Ray.
2. Closing the plant - nobody really knows. However, the decision process will be unfortunately boring too. Look, if AMAT finds it more profitable to leave this plant here, THEY WILL DO IT. If it's more profitable to move it, well... But they HAVE kept other remote locations open after acquisition.
3. Big employers in Kalispell - If you really want companies that employ a lot of people and pair good wages to move here, quit griping in these chat forums and start calling your state legislators. Tell them to pull their heads out and start promoting this area to such companies as AMAT, or Apple, etc. instead of taxing 'em so hard they won't come here. Did you know that Micron once looked at Butte as a place to set up shop? Chose Boise instead.
4. Ray - I am not defending Ray's character or decisions, but I find it humorous the way people blast him for layoffs, as if he was obliged to have the company here at all. He gets very little credit for employing so many people, somehow, that is just what we EXPECT from him.
Time to grow up folks.
exemployee
Great for Applied. Ray will be gone and maybe some of the managers. Bring back the working force that knew what they were doing.
MontanaJim72
I don't see how they have anything to lose. They know they can pay half the wages that they would pay in California or most other states. They will keep it here. After all, we're used to eating the scenery for dinner.
cuzican
We can speculate all we want....but lets hope for the sake of the people working at semi-tool that this saves their jobs and brings some of them back. Hopefully being owned by AM will bring some stability to semitool instead of keeping up the hire a bunch of people and go like crazy for a year, then slow down and layoff a ton of people that semitool has been known for in the past.
JA
This is a good start but NIS is right, why would any big corp. continue using a plant that costs more to run because of it's remote location? Are we sure AM is not just buying up the compitition just to shut them down?
MT GUNNY
I think this move will allow people to get back to work, 200+ in the valley. Capitalism at its finest. Look at California's Business's Leaving in Droves, Due to there Ridiculous Tax's. My guess is that company is trying to get out of California for the more Lucrative Tax laws of Montana. Its a Win Win ! I know I would like to have my job back with Semitool!
now_in_seattle
This doesn't sound good for Kalispell...I have a hard time seeing why a company based in California with operations in China, Texas, and Arizona would keep Semitool in Kalispell.
rivergal
Does this mean another one of our major employers will leave the Valley?