MKS Instruments to buy Atotech for $5.1bn

September 2021 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

September 2021 Issue

Semiconductor equipment manufacturer MKS Instruments Inc has agreed to acquire Atotech Ltd in a cash and stock deal valued at $5.1bn.

Under the terms of the deal, MKS will pay $16.20 in cash and 0.0552 of a share of MKS common stock for each Atotech share, for a per share value of about $26. The offer represents a premium of around 10 percent to Atotech’s closing price on 10 June, the day reports of a potential deal between the parties first emerged. While the equity value of the transaction is $5.1bn, the enterprise value of the deal is approximately $6.5bn.

The merger, which has been unanimously approved by the MKS and Atotech boards of directors and is subject to Atotech shareholder approval, approval of the Royal Court of Jersey, regulatory approvals and other customary closing conditions, is expected to close by the fourth quarter of 2021.

US-based private equity firm The Carlyle Group, which own 79 percent of Atotech, has agreed to vote in favour of the transaction. Carlyle bought Atotech in 2017 from Total SA and took the company public in February.

MKS intends to fund the cash portion of the transaction with a combination of available cash on hand and committed debt financing. The combined company is expected to have pro forma net cash and investments of approximately $800m and total debt outstanding of $5.3bn at closing, with an estimated gross leverage ratio of under four times and net leverage ratio of under 3.5 times. MKS has also obtained a commitment to replace its current $100m asset-based revolving credit facility with a $500m revolving credit facility.

Atotech specialises in metal and surface-finishing solutions used for applications in electronics, including semiconductors and general metal finishing for automotive construction clients, according to its website.

“Together, MKS and Atotech will be uniquely positioned to drive faster, better solutions and innovations for customers in advanced electronics,” said John T.C. Lee, president and chief executive of MKS. “By combining leading capabilities in lasers, optics, motion and process chemistry, the combined company will optimize the PCB Interconnect, a significant enabling point of next-generation advanced electronics that represents the next frontier for miniaturization and complexity.

“We anticipate the addition of Atotech will position MKS to enable roadmaps for future generations of advanced electronics devices,” he continued. “The acquisition of Atotech also provides MKS with a recurring revenue stream from a consumables portfolio for leading-edge devices, with meaningful scale and potential on which to build.”

“The combination of Atotech’s expertise in electroplating and chemistry and MKS’ strengths in lasers, laser systems, optics and motion will enable innovative and ground-breaking solutions for customers in the areas of materials processing and complex applications,” said Geoff Wild, chief executive of Atotech. “This transaction is an excellent outcome for our shareholders, and we believe it will provide immediate value and the opportunity to benefit from the upside potential of the combined company.”

MKS said the deal will help it gain technology as printed circuit boards for electronics become increasingly complex and physically smaller. The company expects $50m in annual cost synergies within 18 to 36 months from closing of the transaction, which will be accretive to earnings within the first year and add to MKS’ free cash flow.

MKS considers acquisitions to be at the heart of its strategy, having carried out 22 such deals. Notable transactions in recent years include the 2016 acquisition of manufacturer Newport Corp and the 2018 purchase of Electro Scientific Industries Inc. which valued the company at around $1bn.

In February, MKS also made a $6bn offer for laser maker Coherent Inc, but lost out to rival II-VI Inc which submitted a $7bn bid.

Richard Summerfield