Zygo to merge with ESI

Oct. 16, 2008
Metrology company Zygo and photonic microengineering company Electro Scientific Industries have agreed to merge in an all-stock transaction worth $173.5 million.

Electro Scientific Industries, Inc. (ESI; Portland, OR) and Zygo Corporation (Middlefield, CT) have entered into a definitive agreement under which the companies will merge in an all-stock transaction worth approximately $173.5 million. The merger combines two photonics-based technology leaders, possessing complementary technologies and strong brand names--ESI as a global provider of photonic microengineering solutions, with Zygo as a provider of high-precision metrology solutions and optical systems.

The new company will be called ESI. The facilities of the company in Oregon and Connecticut are not scheduled to relocate at this time, according to company spokesman Brian Smith. As for layoffs, as typical when public companies merge, certain redundant positions are likely to be comsolidated, but no decisions about staff layoffs have been made--or they will be minimal, said Smith.

Revenues for the combined company for calendar year 2007 were approximately $458 million. This combination creates new growth opportunities, increases the scale of the combined companies, and mitigates the economic ups and downs of business cycles through market-segment diversification.

Under the terms of the merger agreement, Zygo shareholders will receive 1.0233 shares of ESI stock for each share of Zygo stock, in a tax-free transaction. Based on yesterday's closing price of ESI stock, this represents a value of $10.30 per share of Zygo common stock. Upon closing, ESI will issue approximately 18.1 million shares on a diluted basis to complete the transaction, resulting in 40% Zygo shareholder ownership of the combined company.

"The combination of ESI and Zygo accelerates our growth strategy by combining the core competencies and market presence of two innovative leaders in the field of photonic-based solutions," remarked Nick Konidaris, president and CEO of ESI. "Zygo's precision metrology systems greatly enhance ESI's portfolio of differentiated laser microengineering technologies. ESI possesses substantial strengths in the area of systems design and high-volume production support that will strengthen the partnership and better address the needs of our global customers. The combination of the two companies will create a premier photonic microengineering and metrology systems company."

"Leveraging ESI's systems expertise, which spans systems design, sales and support infrastructure, and market knowledge, should allow us to better execute on Zygo's growth strategy that is centered around integrating our world-class metrology and optics technologies into in-line system solutions," added Bruce Robinson, chairman and CEO of Zygo. "Given our complementary nature, similar culture, and the ability of each company to help the other achieve its strategic goals, we have decided now is the right time for us to come together. In our view, this is a compelling transaction for Zygo's shareholders, and it should provide us with the resources we need to realize the full market potential of our technologies."

Konidaris continued, "Although the merger provides many technical and competitive advantages, the largest creation of value will be in combining the talent and superior technical expertise of two great organizations."

"We believe this merger delivers significant value to the shareholders of both companies. Based on estimated synergies of $5-7 million from revenue projections and annual cost savings, the merger is anticipated to be accretive on a non-GAAP basis in the first full fiscal year of combined operations. As a result of the complementary nature of the technologies, there is little product or technical overlap, reducing risks typically associated with integration. In addition, this merger accelerates our existing growth strategy by extending our presence into adjacent markets in the microelectronics, medical, industrial, security, and defense sectors. Finally, combining the resources of these two industry-leading companies will provide the size and scale to make strategic investments and to better compete in today's challenging international markets," concluded Konidaris.

The merger is subject to approval by both companies' stockholders, as well as the satisfaction of customary closing conditions and regulatory approvals. The board of directors at each company has unanimously approved the merger agreement. The companies expect the transaction to be completed in the first calendar quarter of 2009. Following closing of the transaction, the board of directors of ESI will be comprised initially of eleven members, three of whom will be designated by Zygo.

Contingent upon the close of the merger, the board of directors of ESI has approved an increase to the existing share repurchase program to $100 million of outstanding ESI common stock. The repurchases will be made at management's discretion in the open market in compliance with applicable securities laws and other legal requirements and are subject to market conditions, share price, and other factors. There is no fixed completion date for the repurchase program. The company has repurchased approximately $4.7 million against the existing authorization.

Needham and Company acted as financial advisor to ESI in the transaction. Goldman Sachs acted as financial advisor to Zygo Corporation.

RELATED ARTICLES:

Laser Focus World - ZYGO scientist elected as SPIE Fellow

Laser Focus World - SEMICONDUCTOR PROCESSING: Photovoltaics ...

About the Author

LFW Staff

Published since 1965, Laser Focus World—a brand and magazine for engineers, researchers, scientists, and technical professionals—provides comprehensive global coverage of optoelectronic technologies, applications, and markets. With 80,000+ qualified print subscribers in print and over a half-million annual visitors to our online content, we are the go-to source to access decision makers and stay in-the-know.

Sponsored Recommendations

How Precision Motion Systems are Shaping the Future of Semiconductor Manufacturing

March 28, 2024
This article highlights the pivotal role precision motion systems play in supporting the latest semiconductor manufacturing trends.

Understanding 3D Printing Tolerances: A Guide to Achieving Precision in Additive Manufacturing

March 28, 2024
In the world of additive manufacturing, precision is paramount. One crucial aspect of ensuring precision in 3D printing is understanding tolerances. In this article, we’ll explore...

Automation Technologies to Scale PIC Testing from Lab to Fab

March 28, 2024
This webinar will cover the basics of precision motion systems for PIC testing and discuss the ways motion solutions can be specifically designed to address the production-scale...

Case Study: Medical Tube Laser Processing

March 28, 2024
To enhance their cardiovascular stent’s precision, optimize throughput and elevate part quality, a renowned manufacturer of medical products embarked on a mission to fabricate...

Voice your opinion!

To join the conversation, and become an exclusive member of Laser Focus World, create an account today!