U.S. manufacturer Applied Materials (AMAT) and Tokyo Electron have agreed to cancel their plans to merge, in what would have created a company with an estimated market value of approximately $ 29 billion.
Santa Clara, Cal.-based Applied Materials said the decision came after U.S. Department of Justice officials said the remedy the semiconductor makers proposed to replace competition that could be lost from the merger was not enough to overcome government anti-trust concerns.
“Based on the DoJ’s position, Applied Materials and Tokyo Electron have determined that there is no realistic prospect for the completion of the merger,” Applied Materials said in a statement. No termination fees will be payable by either party, the company said.
The turnabout sent Applied Materials shares down 6.74% to $ 20.33 in pre-market trading Monday.
“While we are disappointed that we are not able to pursue this path, our existing growth strategy is compelling,” Applied Materials President and CEO Gary Dickerson said in the company’s statement.
Applied Materials has been gaining market share in the semiconductor and display equipment markets, “while making meaningful advances in areas that represent the biggest and best growth opportunities for us,” said Dickerson.
The companies had announced their agreement to combine in September 2013. The transaction would create a “global innovator in semiconductor and display manufacturing technology,” they said at the time.
Applied Materials had intended to exchange about $ 9.3 billion of its shares for Tokyo Electron, the Wall Street Journal reported. Tokyo Electron said the share exchange would also be canceled.
The transaction had represented one in a recent series of corporate tax inversions, a procedure in which a U.S. firm reincorporates its headquarters overseas in a move expected to cut its future U.S. tax bills. The Department of the Treasury in September announced new regulations that make corporate inversions harder to achieve.
As it scuttled the merger plan, Applied Materials announced a new share buy-back program that authorized up to $ 3 billion in repurchases of the company’s stock over the next three years. The program will start in the third quarter of Applied Materials’ 2015 fiscal year, the company said.
“This program reflects our confidence in our performance and opportunities as well as our strong commitment to shareholder returns,” Dickerson said in a statement announcing the buy-back.
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