Applied shells out $5 billion to buy Varian

One of the world’s biggest makers of gear to make chips, Applied has written a $5 billion cheque to buy up one of its rivals Varian.

Varian makes the gear to build the chips that go into the current generation of mobile phones. The bigger fabs are flat out making such chips so the market for the expensive chip making equipment is buoyant.

Applied has predicted second-quarter profit and sales beyond the dreams of analysts’ estimates so it has a far bit of cash to spend. It has $2.7 billion of cash in the bank account and expects to have another $1.2 billion spare cash coming in this year.

Applied Materials has organised 13 buy out deals in the past five years. This is the biggest deal in the technology-equipment industry for nearly five years.

It seems to have paid a lot of cash for the outfit. It looks like about 13 times more than net income of $160 million Varian earns in a year.

In a press release Applied Materials Chief Executive Officer Mike Splinter Varian was a great fit for the outfit’s cunning plans to grow in its core semiconductor business.

He siad that it will give Applied’s wafer fabrication equipment the addition of the technology leader in ion implantation which is a critical step in integrated circuit manufacturing.

Varian’s ion implant products apparently work with Applied’s suite of products in the areas of transistor, interconnect, wafer level packaging and patterning.

Added together the two of them will be able to give punters machines to make higher performance chips particularly for mobile applications with faster speeds and longer battery life.

Varian’s technology has strong potential to extend into adjacent markets, including solar, display and light emitting diodes, he said.

Varian’s chief executive officer Gary Dickerson said that Applied’s moves into the solar and display markets can help push its ion technology into those areas.

Both boards seem pretty keen on the idea and have approved it already.

The closing of the acquisition is subject to customary conditions, including approval by Varian’s shareholders and the usual financial watchdogs.