FormFactor Inc. (Nasdaq: FORM), a semiconductor testing company, is buying competitor Cascade Microtech Inc. (Nasdaq: CSCD) for $352 million in cash and stock.
The combined company will take over the complementary market leadership positions of the pre-merger companies in various categories of semiconductor testing and measurement. FormFactor, based in Livermore, California, expects the combined company to realize $10 million to $12 million in annualized cost synergies within 18 to 24 months of closing, which is expected by mid-2016. Cascade is based in Beaverton, Oregon.
The market served will grow to $1.4 billion from $1 billion by opening up the engineering systems business and providing a way for expanding test and measurement businesses, according to FormFactor. Also, the combined resources of the merged company will have a larger customer base that is less dependent on the top 10 customers for revenues, and the deal will provide tax benefits.
The combined company will use FormFactor's name, with the company’s CEO, Mike Slessor, and board chairman, Tom St. Dennis, continuing in their roles. One new board member from Cascade’s board is expected to join FormFactor’s board after the deal closes, and Cascade’s current stockholders will own about 15 percent of the merged company.
Cascade’s stockholders must approve before the transaction is finalized. The board of directors from both companies unanimously approved the deal. FormFactor intends to pay for Cascade using $120 million in cash on hand and $150 million in debt financing.
Needham & Company LLC is serving as financial adviser to FormFactor and Davis Polk & Wardwell LLP is legal counsel. For Cascade, Stifel is acting as financial adviser and Perkins Coie LLP is legal counsel.
In 2015, announced deals in the semiconductor space included Mellanox Technologies (Nasdaq: MLNX) buying EZchip (Nasdaq: EZCH), announced in September; Diodes Inc. (Nasdaq: DIOD) acquiring Pericom Semiconductor Corp. (Nasdaq: PSEM), also announced in September; and Intel Corp. (Nasdaq: INTC) agreeing in June to buy Altera Corp. (Nasdaq: ALTR).