Nanometrics and Rudolph Announce Merger to Target Broader End-to-End Market

Recently, Nanometrics Incorporated, a leading supplier of process control metrology and software analysis, and Rudolph Technologies, a leading supplier of semiconductor process control systems, lithography equipment, wafer fab and advanced packaging equipment software, announced that the two companies will merge. They further pointed out that the merged company will become the preferred end-to-end metrology, inspection, process control software and lithography equipment supplier for the semiconductor industry and other advanced markets.

According to the data, Nanometrics provides automatic measurement systems for optical critical dimension (OCD) measurement, thin film measurement, and wafer stress measurement applications under transistor and interactive operation, and the Lynx platform, which can enable cluster metrology factory automation to be applied to wafer metrology, such as optical critical dimension measurement and thin film process control.

In addition, Nanometrics automated and integrated systems are used for a variety of process controls, including dimensional and film thickness measurement, topographic measurement, defect detection and overlay registration, as well as for analysis of various other properties of thin films, such as their optical, electrical and material properties.

Nanometrics process control solutions are deployed in production processes, from front-end substrate manufacturing to high-volume semiconductor and other device production, as well as wafer-level packaging application processes. Nanometrics sells its measurement and inspection systems directly or through foundry channels to semiconductor manufacturers and equipment suppliers, as well as manufacturers of high-brightness LEDs, solar photovoltaics, data storage devices, silicon wafers and masks.

Rudolph Technologies, Inc. was founded in 1940 and is headquartered in Wilmington. They design, develop, manufacture and support process control defect detection and measurement, advanced packaging lithography technology, data analysis systems and software used in the manufacture of microelectronic facilities.

The company also provides wafer process and back-end manufacturing yield management solutions for wafer processing and final manufacturing, providing defect detection, lithography, probe card testing and analysis, thin film measurement, etc. through independent systems. The company's process control software solutions are aimed at improving two-run comparison control, fault detection, classification and automation tools, etc., and also provide spare parts.

It is disclosed that after the merger is completed, Rudolph's CEO Michael Plisinski will serve as the CEO of the merged company, Rudolph's CFO Steven Roth will serve as the CFO of the merged company, and the executives of the two companies will form an experienced leadership team. The board of directors will be led by Nanometrics director Christopher Seams and will have 12 directors (six from each company). The merged company will be headquartered in Wilmington, Massachusetts, and will continue to operate at Nanometrics' headquarters in Milpitas, California.

“Nanometrics has a long history of innovation in optical metrology, pioneering the use of scatterometry for semiconductor process control,” said Pierre-Yves Lesaicherre, President and CEO of Nanometrics. “In recent years, we have established a strong position in optical critical dimension metrology, enabling the rise of advanced technology nodes at every major semiconductor manufacturer worldwide. Our merger with Rudolph announced today marks the culmination of growth, diversification and scale for our respective businesses. We believe our globally-based support organization, technology development team and product portfolio will create a unique end-to-end solution for the entire semiconductor manufacturing flow.”

Michael Plisinski, CEO of Rudolph, added, "This strategic transaction brings together two successful and complementary teams and product portfolios. Nanometrics' metrology portfolio is a strong strategic fit with Rudolph's current diversified product lines, including software, inspection, metrology and lithography. Our current product lines have created integrated solutions for the advanced packaging market, allowing us to draw from a larger product line in the future. We expect to develop new integrated solutions for our customers and help us innovate rapidly across the entire value chain that our customers are integrating, from front-end manufacturing to back-end packaging. Bringing these two successful and complementary teams together enables us to solve our customers' high-value problems for years to come."

The merger brings together two leading semiconductor inspection and metrology companies with highly complementary capabilities. Investors, customers, employees and all constituents will benefit from:

Complementary Product Lines : Nanometrics and Rudolph have highly complementary product portfolios. By combining front-end metrology with inspection solutions, the new company will have the opportunity to provide more comprehensive process control solutions to the world's leading semiconductor equipment manufacturers. These served markets are also complementary as the combined product portfolio provides tools and software to customers producing advanced nodes and specialized equipment at the front end, and advanced packaging at the back end. The combined technology portfolio and established channels in these markets are expected to accelerate the ability to serve both the front-end and back-end markets as customers continue to invest in more advanced process control solutions.

Increased Served Market : Each company currently has at least $1 billion of semiconductor industry SAM, with additional SAM expansion opportunities of $400 million to $500 million for each company. The combination is expected to expand the market opportunity served by the companies to approximately $3 billion. Given each company’s capabilities in the markets they serve, the combination is expected to strengthen the joint team’s opportunity to increase combined SAM share and invest in future expansion.

Global Scale : The combined company will have a broader global scale, enabling it to better invest, compete and deliver innovative services to its client base. The combined company will have global offices and facilities in the United States, China, Europe, Japan, Korea, Singapore and Taiwan, including a strong combined team around the world. Based on 2018 results, Nanometrics and Rudolph had combined revenues of approximately $600 million and operating income of $118 million. In addition, at the end of the first quarter, the companies had total cash and marketable securities of $319 million, liquidity of $526 million and no debt.

Strong Cash Generation : The companies generated $223 million of cash flow from operating activities in 2017 and 2018. The combination is expected to enhance free cash flow generation for the combined business, resulting in a stronger cash position to enable strategic capital deployment to further enhance shareholder value.

Increased Shareholder Value : The combined company is expected to drive long-term shareholder value through cost synergies and revenue growth opportunities. Annual cost synergies are expected to be at least $20 million, primarily from the elimination of duplicate public company costs, elimination of redundant facility leases and other general administrative areas. The two companies expect to achieve additional potential upside from revenue synergies through cross-selling and software modules.