Korean Regulators Approve TOKYO ELECTRON LTD (OTCMKTS:TOELY) Deal

Korean regulators have approved merger deal of Applied Materials, Inc. (NASDAQ:AMAT) and TOKYO ELECTRON LTD (OTCMKTS:TOELY). The Fair Trade Commission said hat it would conditionally give its nod to the proposed merger deal between the two companies in coming month. The regulator reached an agreement as previous discussions prompted in restricting competition in certain business segments that the merged company had huge bargaining power in.

The details

The Fair Trade Commission is in talks with regulators in six nations including Japan and the United States to decide terms before agreeing on the deal. The regulators in Korea also conducted a secret meeting with executives of local semiconductor components suppliers to tell them the decision of a conditional approval.

The opposition

SK Hynix and Samsung Electronics submitted their views to the Korean regulator over the probable impact on the industry after the deal approves. TOKYO ELECTRON LTD (OTCMKTS:TOELY) and Applied said that the merger will not hurt fair competition. Samsung and HYnix, the two semiconductor major firms, and other local components suppliers initially were against the Tokyo Electron-Applied Materials merger as the later company has already secured a 20% share in semiconductor equipment market in Korea.

The significance and plans

Given the market share Tokyo Electron and Applied will have in display equipment and chip verticals after merger, the market expected it to be a tough call to get regulatory approval. The top chip manufacturers are expected to raise their opposition against the deal in coming days. The two companies had more than one-fourth of the global chip equipment market share. If the merger goes through, the companies will get some tax benefits on the basis of company’s intentions to incorporate in The Netherlands. The merged entity is expected to have a tax rate of 17%. There are some experts who call the merger being motivated by industry’s secular challenges.

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