Benzinga | Jan 4, 2021 07:41AM EST

Applied Materials Says On Jan 1, 2021, Co., Kokusai Electric And KKR HKE Investment L.P. Entered Into An Amendment To Share Purchase Agreement; Base Purchase Price Increased To $3.5B

As previously reported, on June 30, 2019, Applied Materials, Inc., a Delaware corporation ("Applied"), entered into a Share Purchase Agreement (the "Share Purchase Agreement") with Kokusai Electric Corporation, a stock company (kabushiki kaisha) organized under the laws of Japan ("Kokusai Electric"), and KKR HKE Investment L.P., a limited partnership organized under the laws of the Cayman Islands ("KKR"). The Share Purchase Agreement provides, among other things, that: (a) upon the closing of the transactions contemplated by the Share Purchase Agreement (the "Closing"), KKR would sell all of the common shares of Kokusai Electric to Applied for $2.2 billion in cash (the "Base Purchase Price"), subject to certain adjustments; (b) the Closing is subject to customary conditions, including, among others, the receipt of specified regulatory and governmental consents and approvals; (c) if the Share Purchase Agreement is terminated under certain circumstances involving the failure to obtain required regulatory approvals, Applied would be obligated to pay KKR a termination fee equal to $154 million in cash; and (d) either Applied or KKR may terminate the Share Purchase Agreement if the Closing does not occur by 11:59 p.m. (New York time) on December 30, 2020, which was the extended outside date mutually agreed by Applied and KKR pursuant to the Share Purchase Agreement (the "Outside Date"). As of the date of this filing, all regulatory approvals other than approval of the transactions contemplated under the Share Purchase Agreement by the State Administration for Market Regulation of the People's Republic of China have been obtained, and Applied believes that progress is being made towards receipt of such approval.

On January 1, 2021, Applied, Kokusai Electric and KKR entered into an amendment to the Share Purchase Agreement (the "Amendment"), pursuant to which the parties agreed, among other things, that: (a) the Outside Date is extended until 11:59 p.m. (New York time) on March 19, 2021 (the "Extended Outside Date"); (b) the Base Purchase Price is increased to $3.5 billion; (c) if all of the conditions to the Closing are satisfied on or prior to the Extended Outside Date, the Extended Outside Date is automatically extended to the first business day following the first date on which the parties would otherwise be obligated to consummate the Closing in accordance with the Share Purchase Agreement (or such other date mutually agreed in writing by Applied and KKR); (d) if all of the conditions to the Closing are not satisfied on or prior to the Extended Outside Date, the Share Purchase Agreement is deemed to be automatically terminated by KKR effective as of 11:59 p.m. (New York time) on the Extended Outside Date (unless otherwise mutually agreed in writing by Applied and KKR); and (e) if the Share Purchase Agreement is terminated or deemed to be automatically terminated under certain circumstances involving the failure to obtain required regulatory approvals, Applied is obligated to pay KKR a termination fee equal to $154 million in cash.

Applied determined that the revised purchase price represents a multiple of approximately 8.75x of projected fiscal 2021 synergized adjusted EBITDA for Kokusai Electric, and believes that the acquisition will provide substantial value for Applied's shareholders. Over the past 18 months, Applied has observed a more favorable long-term outlook for the overall semiconductor equipment market, including positive trends in the memory segment, increased demand for installed base services, and higher valuations for companies like Kokusai Electric that help enable the semiconductor industry and the greater global technology ecosystem.

The foregoing description of the Share Purchase Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Share Purchase Agreement, which is filed as Exhibit 2.1 to Applied's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2019 and incorporated herein by reference. The foregoing description of the Amendment and the transactions contemplated thereby does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Amendment, which is filed as Exhibit 2.1 hereto and incorporated herein by reference.