Applied Materials Expects Kokusai Deal to Fall Through

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Applied Materials Inc. said it expects a planned $3.5 billion acquisition of KKR & Co.-owned Kokusai Electric Corp. to fall through since it has yet to receive regulatory approval in China.

The U.S. maker of machines used to manufacture semiconductors said that if it doesn’t receive approval by Friday, it will consider the deal terminated and pay KKR a $154 million cash termination fee. March 19 was the initial deadline for approval in China, the final remaining jurisdiction where sign-off is needed.

As the world’s largest market for semiconductors, Chinese regulatory approval is essential for this deal. Semiconductors are a key area of contention between the U.S. and China. Other deals in the industry awaiting regulatory sign-off from China include the Analog Devices Inc. acquisition of Maxim Integrated Products Inc. and the Marvell Technology Group Ltd. purchase of Inphi Corp.

Applied Materials Expects Kokusai Deal to Fall Through

Applied Materials initially agreed to buy Kokusai, a Japanese maker of semiconductor equipment in 2019. In January, Applied Materials raised its offer 59%, citing higher valuations in a growing chip industry. The Philadelphia Stock Exchange Semiconductor Index is up about 10% this year, following a 51% surge in 2020. Shares of Applied Materials are up 39% this year.

Applied Materials also said its board has approved a new $7.5 billion stock-buyback authorization, supplementing its current program, which has roughly $1.3 billion remaining.

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