Novellus produces deposition machine and Lam Research manufactures etch equipment. The synergy should be good for both companies as well as the industry. Lam Research will have quick access to Intel (INTC) while Novellus will gain ground with NAND flash producers such as Samsung.
We pointed to the fact that the chip sector is one industry to keep an eye on back in early 2010. Since our recommendation, there has been two major acquisitions, Applied Materials (AMAT) bought Varian Semiconductor and Advantest (ATE) bought Verigy. This latest deal may not be the last but we feel that the industry has consolidated enough that a big takeover such as this may not come around any time soon.
Now that the deal is in place, let's take a look at the most recent investment research reports for the assessed fair value (F/V) of Novellus:
| Firm | Date | F/V | % Diff |
| Credit Suisse | 6-Dec | $42.00 | -5% |
| S&P | 10-Dec | $41.00 | -8% |
| Valueline | 7-Oct | $49.40 | 11% |
| Morningstar | 11-Nov | $29.00 | -35% |
| Buyout Value | 15-Dec | $44.42 |
The following is a recap of the Novellus fundamental figures on the day it was taken over.
P/E - 9.91
F P/E - 12.90
P/Sales - 1.62
P/Book - 2.42
Reference:
Bloomberg: Lam Research to Buy Novellus Systems for $3.3B
EETimes: Lam to buy Novellus in $3.3B, all-stock deal