Entegris to Acquire CMC Materials for $6.5B; CMC Soars 34%

Specialty materials supplier Entegris, Inc. (NASDAQ:ENTG) and Illinois-based CMC Materials, Inc. (NASDAQ:CCMP) have signed an agreement under which the former will acquire the latter for nearly $6.5 billion.

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Following the announcement on Wednesday, CMC Materials surged nearly 34% to close at $195.50. Meanwhile, shares of Entegris closed around 0.5% down but gained 1.6% in the after-hours trading session to end the day at $144.78.

Transaction Details

As per the agreement, for each share of CMC Materials, its shareholders will get 0.4506 shares of Entegris and $133 cash. The consideration is 35% higher than the closing share price of CMC Materials on December 14.

Once the acquisition is completed, which is expected in the second half of next year, Entegris’ shareholders will own nearly 91% of the merged company while the remaining 9% will be held by the shareholders of CMC Materials.

CEO Comments

Commenting on the deal, the President and CEO of Entegris, Bertrand Loy, said, “Acquiring CMC Materials will further differentiate our unit-driven platform and advance our ability to provide a broad range of process solutions for our customers, at a faster time-to-solution. The highly complementary combined portfolio creates the industry’s most comprehensive and innovative end-to-end electronic materials offering, as well as significantly expands our growing served market and content per wafer opportunity.”

CMC Materials’ President and CEO David Li said, “The combination provides immediate and substantial value to CMC Materials shareholders and provides meaningful participation in the long-term growth opportunities created by the transaction.”

“As part of Entegris’ leading platform, we will maintain our strong focus on technology innovation and customer partnerships and provide expanded opportunities for our employees,” Li added.

Strategic Impact of the Deal

The acquisition is likely to expand Entegris’ reach in the semiconductor applications market to nearly $12 billion. It will also boost the company’s unit revenue to around 80% from 70%.

Meanwhile, Entegris expects the acquisition to significantly add to its adjusted EPS in the first year following the completion of the acquisition. The Massachusetts-based company also expects to record CapEx synergies of $40 million and $75 million of cost synergies within 12 to 18 months after the transaction is closed.

Additionally, Entegris expects to generate revenue synergies through customer response and collaboration, cross-selling opportunities and co-optimized solutions.

About CMC Materials

CMC Materials provides consumable materials to semiconductor manufacturers and pipeline operators across the world. It has 2,200 employees working at 35 locations.

About Entegris

Entegris supplies advanced materials and process solutions for the semiconductor and other high-technology industries. It has operations in the U.S., Canada, Malaysia, Singapore, Taiwan, China, South Korea, Japan, Israel, Germany and France.

Analyst Ratings on CMC Materials

Overall, the stock has a Moderate Buy consensus rating based on 5 Buys, 1 Hold and 1 Sell. The average CMC Materials stock forecast of $171.17 implies 12.5% downside potential. Shares have gained approximately 34% over the past year.

Risk Analysis

According to TipRanks’ Risk Factors tool, CMC Materials is at risk mainly from three factors: Finance & Corporate, Tech & Innovation and Production, each of which accounts for 21% of the total 19 risks identified for the stock.

Under each of these risk categories, the company has four risks, details of which can be found on the TipRanks website.

Wall Street’s Take on Entegris

Recently, KeyBanc analyst Aleksey Yefremov initiated coverage on the stock with a Buy rating and a price target of $183 (28.4% upside potential).

Overall, the stock has a Strong Buy consensus rating based on 7 Buys and 2 Holds. The average Entegris price target of $169.67 implies 19% upside potential. Shares have gained 50% over the past year.