Monday, January 31, 2011

WaferNEWS Watch: ATE-VRGY quietly busy?

It's been a month or so since the drama unfolded around Verigy, LTXC (the fiancée) and Advantest (the 11th-hour suitor). In Nov. 2010 LTXC and Verigy announced a planned merger. In late December Advantest swooped in with its own unsolicited offer whichVRGY at first coyly rejected it, but with language that implied a sweetened offer might be better received. Barclays analyst CJ Muse has suggested VRGY-LTXC is a better strategic fit.

Today things are unusually quiet, though doubtless there's activity behind the scenes. "We think that Advantest and VRGY are still in merger discussions," writes Satya Kumar from Credit Suisse in a report. Regulatory concerns shouldn't be a problem (the combo would trail TER in marketshare by ~50% to 33%), and tech synergies are there (e.g. cross-selling probe cards and handlers, streamlining product roadmaps). Indeed, Kumar thinks the protracted silence is due to hammering out details in breakup fees and other terms in case the deal can't be closed.

A S1/A filing could happen in early Feb, with proxy mailings around the same time; Kumar thinks shareholders will lean toward ATE instead of LTXC (though VRGY might continue to press ahead with LTXC if only to get ATE to accept terms and sweeten the deal). The two sides, he believes, are close enough, and the opportunity attractive enough, that ATE is unlikely to make this a hostile bid and appeal directly to shareholders. "We still think there is enough incentive for Advantest to do what it takes to make this deal happen," he writes. "If there is a will, there can be a way."

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