Summary
Lam Research Corporation (LRCX) announced on October 5, 2016, the termination of its previously announced Agreement and Plan of Merger and Reorganization with KLA-Tencor Corporation (KLA), originally dated October 20, 2015. The decision to terminate was mutually agreed upon after careful review of antitrust agency feedback and an evaluation of the companies' options, concluding that proceeding with the merger was no longer in the best interest of stakeholders. Importantly, neither company will be required to pay any termination fees as per the terms of the original merger agreement. This termination has several financial implications for Lam Research. The termination automatically triggered the cessation of term loan commitments under an Amended and Restated Term Loan Agreement, which was previously established to support the merger. Furthermore, and of significant note to bondholders, the termination of the merger agreement obligates Lam Research to redeem its 3.450% Senior Notes due 2023 ($600 million) and its 3.900% Senior Notes due 2026 ($1 billion). These notes will be redeemed at a price of 101% of their principal amount, plus accrued interest. The company is required to provide notice of this special mandatory redemption within five business days of the termination agreement.
Key Highlights
- 1Lam Research Corporation (LRCX) and KLA-Tencor Corporation (KLA) mutually terminated their merger agreement.
- 2The termination was driven by feedback from antitrust agencies and a mutual decision that the merger was no longer in stakeholders' best interests.
- 3No termination fees will be paid by either Lam Research or KLA.
- 4Term loan commitments totaling $1.53 billion under an Amended and Restated Term Loan Agreement have automatically terminated.
- 5Lam Research is mandated to redeem its $600 million 3.450% Senior Notes due 2023 and $1 billion 3.900% Senior Notes due 2026 at 101% of their principal amount.
- 6The company must issue a special mandatory redemption notice to noteholders within five business days of the termination agreement.
- 7Two KLA nominees will not be nominated or elected to the Lam Research board at the upcoming annual meeting, and the board size will remain at nine.