Why Applied Materials dropped plans to acquire Tokyo Electron

Antitrust concerns terminate $9.4 billion Tokyo Electron merger.

Applied Materials has called off its $9.4 billion acquisition of Tokyo Electron Ltd. amid a regulatory snag.

The companies said that they were told by the Department of Justice that there remained antitrust concerns about a deal that would have merged two of the world’s biggest semiconductor industry suppliers.

“We must take with humility the result that we could not convince the regulators,” Tokyo Electron Chief Executive Tetsuro Higashi told reporters, according to Reuters. “The termination of the merger is a very regrettable outcome, but it does no good to mourn.”

In Austin, the two companies together employed near- ly 3,000 as of last year. Applied Materials operates its largest global manufacturing center in Northeast Austin off U.S. 290. Tokyo Electron employs more than 300 at its U.S. headquarters complex in Southeast Austin. That facility concentrates on marketing and customer technical support, as well as shared services for all of the company’s North American operations.

News of the planned buyout was announced in Sep- tember 2013. Applied Materials’ shareholders were to own about 68 percent of the new company, with Tokyo Electron’s holding about 32 percent.

Applied Materials employs about 14,000 worldwide and had revenue of $9.1 billion in 2014. Tokyo Electron employs about 12,000 and had sales of $5.9 billion in 2014.

“Based on the DO J’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 news release, referring to the Department of Justice.

Tokyo Electron said: “There remains a gap between the view of Tokyo Electron and Applied Materials and the view of the United States Department of Justice, and it becomes apparent that such gap will not be able to be bridged.”

Applied Materials, which is based in Santa Clara, Calif., said Monday that it had autho- rized the repurchase of up to $3 billion of its stock. The buybacks are set to take place over the next three years, starting in its fiscal third quarter.

Applied Materials’ shares fell Monday on news that the merger was off. The company’s shares ended the day down $1.83, or 8.39 percent, at $19.97.

The merger of the two pioneering technology companies would have created the largest player in the consolidating chip-equipment industry.

“Their goal was to conserve resources and avoid some duplication, and it was a way for them to tackle design challenges because they would have had more resources,” Randy Abrams, a semiconductor analyst at Credit Suisse, told the New York Times.

This is the second major corporate merger in less than a week to be called off. On Friday, Comcast abandoned its $45 billion offer for Time Warner Cable because of regulatory concerns. Federal Communications Commission Chairman Tom Wheeler said in a written statement that the proposed transaction created a risk to competition and innovation.