MILPITAS, CA – KLA-Tencor has entered into a definitive agreement to acquire Orbotech in a cash and stock deal valued at approximately $3.4 billion.

Under terms of the deal, KLA-Tencor will pay $38.86 in cash and 0.25 of a share of its common stock in exchange for each ordinary share of Orbotech. The implied value of the offer is $69.02 per share. The deal gives Orbotech an enterprise value of $3.2 billion.

The transaction has been approved by both companies' boards and is expected to close by the fourth quarter, subject to approval by Orbotech’s shareholders, required regulatory approvals and other customary closing conditions. No approval by KLA-Tencor stockholders is required.

The transaction is not subject to any financing conditionality. KLA-Tencor intends to fund the cash portion of the purchase price with cash from the combined company’s balance sheet. In addition, KLA-Tencor intends to raise approximately $1 billion in new long-term debt financing to complete the share repurchase.

KLA-Tencor expects to save $50 million annually due to cost synergies within 12 to 24 months following the closing of the transaction, and the transaction is expected to be immediately accretive to revenue and non-GAAP earnings.

In addition, KLA-Tencor announced a $2 billion share repurchase authorization. The share repurchase program is targeted to be completed within 12 to 18 months following the close of the transaction.

The acquisition will significantly diversify KLA-Tencor's revenue base and add $2.5 billion of addressable market opportunity in the high-growth printed circuit board (PCB), flat panel display (FPD), packaging, and semiconductor manufacturing areas.

“This acquisition is consistent with our strategy to pursue sustained, profitable growth by expanding into adjacent markets,” said Rick Wallace, president and chief executive, KLA-Tencor. “This combination will open new market opportunities for KLA-Tencor, and expands our portfolio serving the semiconductor industry.”

Orbotech will continue to operate under the Orbotech brand as a standalone business of KLA-Tencor based in Yavne, Israel.

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