Lucky break

15 January 2021 By Jeffrey Goldfarb Follow @jgfarb

Applied Materials will pay the buyout shop $3.5 bln for smaller peer Kokusai instead of the $2.2 bln agreed in 2019. Beijing has delayed giving its blessing so long that the microchip sector improved. The rare upward price negotiation should help even if the deal falls through.

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Chipmaking equipment maker Applied Materials said on Jan. 4 that it would pay $3.5 billion, or 59% more than originally agreed, to buy Japanese peer Kokusai Electric from private equity firm KKR, after the deal’s Dec. 30 closing deadline passed before regulatory approval could be obtained from China.

Applied Materials first announced the transaction on July 1, 2019, with a purchase price of $2.2 billion in cash. The revised deadline for completing the deal is March 19, and Applied Materials has agreed to pay KKR a $154 million termination fee if it fails to secure regulatory clearance.

In a similar situation, Cisco Systems said on Jan. 14 that it had agreed to pay 64% more to buy Acacia Communications, a maker of optical components, after Acacia had sought to terminate the deal because Chinese regulators had not approved it. Under the revised terms, Cisco will pay $115 a share, or about $4.5 billion, instead of the $70 a share originally agreed in July 2019. The companies expect to complete the transaction in the first quarter, subject to closing conditions.

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