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Applied Materials Wants The Cream

 

LONDON - Applied Materials is hoping that Dutch semiconductor equipment maker ASM International may be so down on its luck that it is willing to sell of some of its choice assets.

On Friday ASM International said it had received an unsolicited indicative offer from Applied Materials for two of its front-end deposition businesses, which make equipment for the production of chips. Applied Materials (nasdaq: AMAT - news - people ) has put an initial value of between $400 million and $500 million on its atomic layer deposition and plasma-enhanced chemical vapor deposition operations.

ASMI (nasdaq: ASMI - news - people ) shares spiked by 17.1%, or 2.89 euros ($4.53), to 19.79 euros ($31.03), in midday trading in Amsterdam. ASMI's management has been coming under a lot of pressure recently, after it said it expected its front-end business to make a loss in the first quarter. Activist shareholder Hermes Pension Management demanded that Chief Executive Chuck del Prado and all board members step down, arguing that the company had failed to make the business profitable even when the semiconductor industry was booming. A Dutch court has set a deadline of June 23 for the shareholders and the company to settle their differences. (See: "Activists Aim To Oust ASM Management" )

ASMI said that the sell-off would have major implications for its strategy and business model and that it would make an announcement about the offer by June 14. Both Hermes and fellow activist investor Fursa Alternative Strategies have declined to comment on the news.

The trouble is that the two assets are the most valuable and highest-margin businesses that ASM International has within its front-end sector, according to Petercam analyst Eric de Graaf. "They probably won't be willing to sell it because that would be like selling their crown jewels. It would leave them with a business that it would be very difficult to return to profitability." He says that the atomic layer project, in particular, is "one of the holy grails" of the semiconductor industry, allowing a very thin layer to be put onto a wafer, to produce a smaller and more energy-efficient product.

In addition to the equipment it makes for chip production, ASMI also has a 53.0% stake in ASM Pacific Technology, which makes machines used for the assembly and testing of chips.


 

 
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