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While a decline in demand from smartphone makers has hurt memory
chip prices, analysts expect the market to rebound as data
center customers ramp up operations, coupled with higher demand
for chips used in artificial intelligence-based devices and 5G
phones.
Shares of the world's biggest maker of chipmaking equipment were
up 3.3% at $46.40 in trading before the bell.
The deal comes less than two years after KKR took control of
Hitachi Kokusai in a $2.2 billion deal. The Financial Times had
reported in February that the private equity firm was in talks
with two Chinese buyers for the "full or partial" sale of the
company.
Kokusai, which counts Samsung <005930.KS>, SK Hynix <000660.KS>,
Toshiba <6502.T> and Micron <MU.O> among its top customers,
reported revenue of $1.24 billion as of March 2018.
"AMAT needs to acquire a $1B+ revenue business to make a
difference to its revenue and earnings, so this makes sense,"
Cowen and Co analysts wrote in a client note.
The deal would push the U.S. company's share of the chipmaking
equipment market to above 20% from 18%, according to the Nikkei,
which had earlier reported on the deal.
Applied Materials last month forecast third-quarter profit and
revenue above estimates after reporting better-than-expected
quarterly results.
It expects to use a combination of cash and debt to fund the
deal, which is expected to close within a year and immediately
add to its adjusted earnings per share.
Goldman Sachs & Co LLC served as exclusive financial adviser,
and Hogan Lovells and Cleary Gottlieb Steen & Hamilton LLP
served as legal counsel for Applied Materials.
(Reporting by Takashi Umekawa in Tokyo and and Akanksha Rana in
Bengaluru; Editing by Christopher Cushing and Anil D'Silva)
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