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Update On TOKYO ELECTRON LTD (OTCMKTS:TOELY) And Applied Materials, Inc. (NASDAQ:AMAT) Deal

The Fair Trade Commission, a Korean regulator, has approved proposed merger deal of TOKYO ELECTRON LTD (OTCMKTS:TOELY) and Applied Materials, Inc. (NASDAQ:AMAT). The regulatory body stated that the merger will get a conditional approval in next month. The FTC reached an agreement after it completed discussion rounds with other players in the industry. There was a need to evaluate the impact of the deal on competition in certain business segments.

The proceedings

The Fair Trade Commission will discuss merger deal with regulators in six other countries including Japan and the U.S. so as to finalize terms of the merger deal. The regulator even went for a secret meeting with some of the major executives of local semiconductor components suppliers. The primary objective of holding all these meetings is to follow a cautious approach as two companies together can have a huge bargaining power in the industry.

Problems in deal

The two companies in the semiconductor industry, Samsung, and SK Hynix, have submitted their views to the Fair Trade Commission over the impact merger deal can have on other players in the industry. Applied and Tokyo have stated that the deal will not have a negative impact on fair competition. The two firms along with other local suppliers were opposing the deal for quite some time, as Applied Materials owns almost a 20% market share in Korea’s semiconductor industry.

The future ahead

TOKYO ELECTRON LTD (OTCMKTS:TOELY) and Applied, both the companies will have a strong foothold in display equipment and chip verticals after deal. On the basis of their combined market share, it appears the deal might have to face increased hurdles in coming days. Together, they capture more than one-fourth market of the global chip equipment industry. In the event of closure of the deal, the company will yield tax advantage as it will incorporate in the Netherlands. The merged company is anticipated to have a tax rate of around 17%.

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