MKS Instruments Inks $5.1B Deal to Buy Atotech

MKS Instruments, Inc. (MKS) inked a deal to buy Atotech Ltd. (ATC), a provider of specialty electroplating solutions. The cash and stock transaction is worth $5.1 billion and carries an enterprise value of $6.5 billion. Shares of both companies were up in pre-market trading at the time of writing.

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MKS Instruments provides instruments, subsystems, and process control solutions to measure, control, power, monitor, and analyze parameters of manufacturing processes. (See MKS Instruments stock chart on TipRanks)

Atotech shareholders will receive $16.20 in cash and 0.0552 of a share of MKS common stock for each common share they hold.

The deal is expected to close in the fourth quarter of 2021 and is subject to Atotech shareholders and the Royal Court of Jersey’s approval, as well as certain closing conditions.

Carlyle and its affiliates, who own 79% of Atotech’s common shares, have signed an irrevocable agreement to vote in favor of the transaction.

Upon closing, the deal will result in a pro forma annual revenue of $3.8 billion. It will be accretive to MKS’s Non-GAAP earnings per share in the first year, and additive to its free cash flow.

Additionally, MKS expects to earn $50 million in annualized cost synergies within 18 to 36 months.

John T.C. Lee, MKS’s President, and CEO said, “By combining leading capabilities in lasers, optics, motion and process chemistry, the combined company will optimize the PCB Interconnect, a significant enabling point of next-generation advanced electronics that represents the next frontier for miniaturization and complexity.”

The cash portion of the deal will be funded with cash on hand and committed debt financing. MKS has also taken a commitment to replace its current $100 million asset-based revolving credit facility with a $500 million revolving credit facility.

The combined entity will have pro forma net cash and investments of $800 million and total debt of $5.3 billion, with an estimated net leverage ratio of below 3.5 times.

Last month Rosenblatt Securities analyst Scott Graham reiterated a Buy rating on the stock with a price target of $285 implying 60.2% upside potential to current levels.

The stock has a Strong Buy consensus rating based on 6 Buys and 1 Hold. The average MKS Instruments price target of $233.43 implies 31.2% upside potential to current levels. Shares gained 60% over the past year.