KLA-Tencor buying Orbotech for $3.4b
As with most Israeli technology companies traded in New York, there is no controlling interest in Orbotech. The chief beneficiary is Kobi Richter, who owns 5.4% of the company, and will receive $180 million for his stake. In 1983, Kobi Richter and his brother Yochai were among the founders of Orbot, which in 1992 merged with another Israeli AOI company Optrotech (founded by a team led by Shlomo Barak in 1981) to form Orbotech. Yochai Richter, who is chairman of Orbotech and owns 2.1%, will receive $70 million. Kobi Richter's wife Judith owns shares worth $29.2 million under the deal terms.
Only two financial institutions are parties at interest in Orbotech, one American and one Israeli. They are New York-based Renaissance Technologies, which holds 5.2% of the company, worth $174 million under the deal, and Clal Insurance, which owns 5%, worth $167 million.
"This acquisition is a true testament to Orbotech's strong leadership and success," said Orbotech CEO Asher Levy. "I firmly believe that this deal benefits our employees and creates additional value for our shareholders. Together with KLA-Tencor, we will significantly increase growth potential, accelerate our product development roadmap, and enhance customer offerings. Orbotech will continue to operate under the Orbotech brand as a standalone business of KLA-Tencor based in Yavne, Israel."
Orbotech develops technologies used in the manufacture of advanced electronic products. Its equipment is used in three main industries: flat panel displays, printed circuit boards, and semiconductors. In a past interview with "Globes", Levy said, "The chances that someone holds in their hand a smartphone or tablet that Orbotech did not have something to do with its production, design or inspection are pretty much zero."
The announcement of the acquisition states, "With this acquisition, KLA-Tencor will significantly diversify its revenue base and add $2.5 billion of addressable market opportunity in the high-growth printed circuit board, flat panel display, packaging, and semiconductor manufacturing areas. The broader portfolio of leading products, services, and solutions, as well as increased exposure to technology megatrends, will support KLA-Tencor's long-term revenue and earnings growth targets."
"This acquisition is consistent with our strategy to pursue sustained, profitable growth by expanding into adjacent markets," said KLA-Tencor president and CEO Rick Wallace. "This combination will open new market opportunities for KLA-Tencor, and expands our portfolio serving the semiconductor industry. Our companies fit together exceptionally well in terms of people, processes, and technology. In addition, KLA-Tencor has had a strong presence in Israel over the years, and this combination further expands our operations in this important global technology region."
Total cost synergies are expected to be approximately $50 million on an annualized basis within 12 to 24 months following the closing of the transaction, and the transaction is expected to be immediately accretive to KLA-Tencor's revenue growth model, non-GAAP earnings and free cash flow per share.
Shiri Habib-Valdhorn