Chip maker Lam Research acquires KLA-Tencor for $10.6B

Semiconductor maker Lam Research announced Wednesday it will acquire fellow chipmaker KLA-Tencor for $10.6 billion.

The deal will involve a mix of cash and stock, with Lam pay $5 billion in cash and about 80 million shares of Lam common stock valued at $5.6 billion. The deal is expected to close by mid-calendar year of 2016.

Shares of Lam (LRCX) are up 6% in pre-market trading, while KLA (KLAC) shares surge nearly 23%.

"Lam Research and KLA-Tencor's shared commitment to collaboration and building strong customer trust, along with our respective track records of innovation, product leadership, and operational excellence, position us as a combined company to deliver the higher levels of technology differentiation and speed to solutions that are critical to our customers' long-term success," says Lam president and CEO Martin Anstice in a statement.

The combination of Lam and KLA follows another big deal between chipmakers revealed in May: Avago's acquisition of rival Broadcom for $37 billion. Meanwhile, also in May, Intel scooped up chip maker Altera for $17 billion.

On news of the deal Moody’s Investors Service placed KLA-Tencor’s senior unsecured rating under review for upgrade. “The combination will create the second largest semiconductor equipment company behind Applied Materials Inc.,” said Richard J. Lane, senior vice president of Moody’s Investors Service corporate finance group in the report. “As a result of Lam and KLA market positions, growth prospects and margins, we project the combined entity's 2017 projected revenue ($10.8 billion) will exceed Applied Materials ($10.7 billion).”

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