Semiconductor war hots up: Sumitomo committed to acquire Axcelis

18 April 2008

Sumitomo Heavy Industries and Axcelis Technologies, who have a Tokyo-based joint-venture SEN, said that they are ready to engage in discussions regarding the Japanese conglomerate's hostile takeover bid, subject to certain conditions.

Sumitomo said it remains committed to pursuing its takeover bid and that recent deteriorating performance at the companies' joint venture underscored the need for the deal. Axcelis had earlier reported that it expected to post a much wider first-quarter loss on lower income from SEN.

Axcelis has already rejected two bids from Sumitomo, saying the offer undervalues the company because it doesn't take into account market share gains from new products. The first offer, made earlier this year, was worth $532 million, which Sumitomo increased by 15 per cent to $615.6 million in March, or $6 per share.

Although the Axcelis management has been disdainful of the offer, some of its shareholders do not concur. They filed a class-action lawsuit in US District Court against the company in February alleging that it did not act in the best interest of shareholders when it rejected the initial offer.

Regulatory filings show that Axcelis has strong takeover defenses, including a shareholder rights plan, which would make a hostile deal costly and difficult. It also has staggered elections for its directors, making it impossible to replace the entire board all at once. Axcelis has even proposed buying out Sumitomo's stake in SEN, something that has been vigorously opposed by the Japanese conglomerate.

Sumitomo said its private equity partner TPG is still committed to acquiring Axcelis, and it is confident that Axcelis' stockholders prefer the ''certainty and immediate value of our all-cash premium offer to the status quo of Axcelis' long-term underperformance and this Board's intransigence.''