Applied Materials and Tokyo Electron said U.S. regulatory concerns made them call off their $10 bln merger. Fred Katayama reports.
Another proposed marriage goes bust after regulatory scrutiny. Applied Materials called off its $10 billion takeover of Tokyo Electron, a move that would've combined the world's first and third largest chip equipment makers. The companies said U.S. regulator's antitrust concerns made them scrap their deal. The U.S. government has become increasingly reluctant to bless deals that will take out a main rival. The news comes just days after regulators' concerns killed Comcast's mega merger with Time Warner Cable. And the Federal Trade Commission has sued to block food distributor Sysco from buying its biggest rival, US Foods. Susquehanna Financial analyst Mehdi Hosseini said, "One thing for sure, Applied Materials won't get a tax break. They had intended to reincorporate in Holland post the Tokyo Electron merger close, helping reduce their tax rate from around 25 percent to single digit." To appease shareholders, both companies announced share buybacks. But Applied Materials' shares dropped in early trading, and Tokyo Electron's closed lower in Tokyo. Chip equipment suppliers have been consolidating amid the rising cost of developing chips and building chip plants. Tokyo Electron now says it's open to alliances with other companies. But Applied Materials, which has been very busy gobbling up companies, says it's confident it can grow on its own.