Israeli' electronics equipment supplier Orbotech Ltd. has closed its $290 million acquisition of Photon Dynamics Inc, provider of test and repair systems for the liquid crystal flat panel display (FPD) industry.

Orbotech is principally engaged in the design, development, manufacture, marketing and service of yield-enhancing and production solutions for specialised applications in the supply chain of the electronics industry. Orbotech's products include automated optical inspection and process control systems for bare and assembled PCBs, imaging solutions for PCB production and AOI, test and repair systems for flat panel displays. Through its subsidiary, Orbograph Ltd., Orbotech develops and markets automatic check reading solutions to banks and other financial institutions.

Under the terms of the agreement, Orbotech is paying $15.60 per share in cash for all of the issued and outstanding shares of Photon Dynamics' common stock, resulting in an aggregate purchase price of approximately $290 million. The acquisition was financed through a combination of internally-generated funds and external-source financing. In connection with the acquisition, Photon Dynamics, Inc. sold its wholly-owned subsidiary, Salvador Imaging, Inc., to a group of private investors.

This transaction will be immediately accretive to Orbotech on a cash basis, and the company expects, as a result of its completion, to record additional revenues of approximately $45 - 50 million during the remainder of 2008 from flat panel diplays.

However, particularly given the prevailing, considerable worldwide economic uncertainty and its potential effect on the electronics industry, the company is currently unable to estimate reliably revenues in subsequent quarters.

While the combined level of backlog in FPD systems for the company and photon dynamics, Inc. is at an all-time high and Orbotech believes that it remains firm,it also ssaid that it "recognises the potential for materially adverse trends in future orders, including deferrals".

As a result of this acquisition, Orbotech expects to realise operational synergies of approximately $15 million to $20 million in 2009. Given the size and importance of this transaction, the company says it is in the process of re-aligning its strategy to focus on those areas that will support its long-terms goals and objectives, and will continue to tailor its investments to support planned growth and maintain its position of technological pre-eminence in the industries that it serves.

"By combining the best of both companies, we will be able to realise our shared strategic vision for growth and diversification in the flat panel display industry and to leverage our customer presence, global infrastructures and technical expertise to increase customer value by building upon the advantages of a united yield management platform," said Rani Cohen, CEO, Orbotech Ltd.

Cohen added, "During the closing period we have been jointly developing integration plans, which we will now start to implement. The existing Photon Dynamics' business will form part of the company's FPD Division. We remain clearly focused on honoring all customer commitments and fulfilling delivery requirements. Beyond that, we look forward to building upon and further expanding the range of AOI, test and repair solutions that we are able to provide to FPD manufacturers."