Varian Semiconductor Equipment Associates — Gloucester's biggest business with nearly 2,000 employees, and the city's only publicly traded company — has agreed to an acquisition by Applied Materials of the Silicon Valley in a deal that will pay Varian stockholders $63 a share, or nearly $5 billion.
But the company is firmly committed to staying in Gloucester, Varian CFO Bob Halliday said Wednesday.
The announcement was made Wednesday morning in Santa Clara, Calif., where Applied Materials, the world's largest semiconductor equipment manufacturing company, is based.
The premium on Tuesday's closing price paid for Varian stock to get the leading supplier of implant technology, wowed investors who sent Varian stock soaring on the NASDAQ exchange. The company's stock climbing by 20.81 points or — 51.32 percent — to 61.36, an all-time high.
Applied Materials, the world's largest semiconductor equipment manufacturer with $9.6 billion in sales and about 13,000 employees, closed down less than 1 percent at $15.09 on the NASDAQ.
"We were stunned (at the price paid)," said Peter C. Andersen, a portfolio manager with Congress Asset Management Company in Boston, where its porfolios include Varian stock.
Varian will operate as a business unit of Applied's Silicon System Group on a growth track, aiming to double in size, according to Varian Halliday. He said the companies, while in the same sector, work with complementary technologies.
Varian added nearly 129 jobs in the last quarter, and has online postings for 255 more it hopes to fill.
Varian, which has been in Gloucester since 1975, has nearly 2,000 employees, most working in the corporate campus in Gloucester's Blackburn Industrial Park.
Two thirds of Varian revenue, now well over $1 billion a year, comes from sales to chipmakers in Asia of multi-million capital machines needed for implanting ions onto silicon wafers.
"Varian is a great fit for our strategy to profitably grow share in our core semiconductor business, with best-in-class technology and talent," said Applied's chairman and CEO Mike Splinter.
In a nation and state that has seen manufacturing migrate off shore and overseas, becoming importers with a negative balance of trade, Varian sticks out as something of an anomaly at the far reach of Route 128, also known as "America's Technology Highway."
But it's hardly an anomaly to Applied.
Mayor Carolyn Kirk said she spoke Wednesday with an official of Applied, who said the corporate cultures of the two companies match up closely.
"What surprised most of us — the premium they're offering, 55 percent of closing price of stock — signals to us that Applied Technology sees some incredible value in acquiring Varian," Kirk said.
Andersen described the deal as the largest in the semiconductor field in the last five years.
"It signals to the general market that the growth of semiconductors is going to take off again," he said.
"Varian's applications are in the sweet spot for developing more advanced semiconductors for ion implantation, miniaturized, using less power, integrating (many functions) into one chip," Andersen said. "I think Applied has acknowledged that and rather than competing and building, they're buying it."
"Varian's ion implant products complement Applied's Silicon System Group's successful suite or products," Applied officials said in a press release.
In a quarterly report last Thursday, Varian posted record performances in virtually every category, with quarterly revenues up $63 percent to $313 million, and gross profits up 62 percent to $162 million.
The merger, said Halliday, will give the combined company "more tools in the tool kit" as the scale of the sub atomic material becomes ever smaller, and different technologies, including solar, LED, open up for implantation and related processes.
"We don't have redundancies," he said.
The deal is subject to approval by Varian stockholders and government regulators, which will measure the proposed new company against anti-trust laws, so the agreement is likely to take months to finalize.
Halliday said the strategic plan is to double the size of Varian to a $2 billion company — which, under the merger strategy, is to be fused to the larger buyer and run as subsidiary while keeping "the Varian name."
"We believe the opportunity is very attractive for Varian's customers, employees and shareholders," said Varian's CEO Gary Dickerson. "In addition to our combined strenghts in the semiconductor space,
"Applied's proven capability to extend its technology to adjacent markets like solar and display can help unlock the tremendous potential for ion implantation in these markets," he said.
Richard Gaines can be reached at 978-283-7000, x3464, or at email@example.com.