Applied Materials After Rout Returns 40% With New Bet: Real M&A

Quote: Applied Materials Inc. (AMAT) will complete the largest takeover of a semiconductor-equipment maker. Varian Semiconductor Equipment Associates Inc. (VSEA) traded within $1.50 of Applied Materials’ $63-a-share agreement before equities plummeted in the past week as the U.S. had its AAA debt rating cut for the first time. With the gap at more than $4 a share, arbitragers betting on the acquisition now stand to make an annualized gain of almost 40 percent if the transaction wins antitrust approval from regulators and closes in mid-October, according to data compiled by Bloomberg. While the slump in U.S. equities is threatening to derail what had been the best year for takeovers since 2007, Applied Materials said yesterday it remained “committed” to the deal. The company, which is spending $4.9 billion to get back into a business it lost to Varian, has already raised more than a third of the total selling bonds and has $3.3 billion in cash. Applied Materials also has the highest credit rating in the industry. “This is a good buyer with a good balance sheet,” Yemi Oshodi, managing director of M&A and special situations trading at New York-based WallachBeth Capital LLC, said in a telephone interview. In addition, “we don’t see anything that leads us to think there’s going to be any concern on the regulatory front. This is the transaction that I would recommend for any client,” compared with the risk involved, he said. Acquisition Detail Representatives for Gloucester, Massachusetts-based Varian didn’t respond to telephone calls or e-mails requesting comment. Santa Clara, California- based Applied Materials, said in an e-mail that the company is “committed to our acquisition of Varian.” He declined to comment on the regulatory approval process. announcement in May. After the companies disclosed the deal, Varian never fell below $60 until last week, when the Standard & Poorâ...
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