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APPLIED MATERIALS INC /DE 8-K Report, Material Agreement (Jan 4, 2021)

Filed January 4, 2021For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) has filed an 8-K report detailing significant amendments to its previously announced Share Purchase Agreement to acquire Kokusai Electric Corporation. The most notable changes include an extension of the outside closing date to March 19, 2021, and a substantial increase in the Base Purchase Price from $2.2 billion to $3.5 billion. This revised purchase price is justified by Applied's management as representing approximately 8.75x projected fiscal 2021 synergized adjusted EBITDA for Kokusai Electric, aligning with favorable long-term trends observed in the semiconductor equipment market, particularly in the memory segment and demand for installed base services. Additionally, the company amended its Term Loan Credit Agreement, extending the lenders' commitments to fund the $2.0 billion term loan facility to April 30, 2021. This facility is intended to finance a portion of the acquisition. The amendments underscore the ongoing efforts to finalize this strategic acquisition, which Applied believes will provide substantial value to its shareholders by enhancing its position within the critical semiconductor industry ecosystem.

Key Highlights

  • 1Applied Materials amended its Share Purchase Agreement to acquire Kokusai Electric, extending the outside closing date to March 19, 2021.
  • 2The purchase price for Kokusai Electric has been increased from $2.2 billion to $3.5 billion.
  • 3The revised price is based on an approximate 8.75x multiple of projected fiscal 2021 synergized adjusted EBITDA for Kokusai Electric.
  • 4A $2.0 billion Term Loan Credit Agreement has been amended, extending lender commitments to April 30, 2021, to support the acquisition financing.
  • 5All regulatory approvals for the acquisition have been obtained, except for approval from China's State Administration for Market Regulation.
  • 6Applied Materials views the acquisition as providing substantial value to shareholders, citing positive long-term trends in the semiconductor equipment market.

Frequently Asked Questions

The key changes include extending the outside closing date to March 19, 2021, and increasing the base purchase price from $2.2 billion to $3.5 billion. The term loan commitment period has also been extended to April 30, 2021.

Applied Materials increased the price based on their assessment of Kokusai Electric's projected fiscal 2021 synergized adjusted EBITDA, representing an approximate 8.75x multiple. Management believes this reflects the acquisition's substantial value, supported by favorable long-term semiconductor market trends.

Yes, all regulatory approvals have been secured except for the approval from the State Administration for Market Regulation of the People's Republic of China. Applied Materials is making progress towards obtaining this final approval.

The Term Loan Credit Agreement was amended to extend the lenders' commitments to fund the $2.0 billion term loan facility to April 30, 2021. This facility is intended to help finance a portion of the Kokusai Electric acquisition.